CALCULATORS·PERFORMANCE

Your return as an annual rate.

Compound annual growth rate between a starting and ending account value.

INPUTS

Starting value

Ending value

Time elapsed (years)

Decimals are fine — 2.5 = 30 months.

TRY ONE

RESULT

CAGR+20.11%

Total return+150.00%

Simple annualized (wrong, common)+30.00%

Started$10,000

Ended$25,000

Over5 years

ALSO USEFUL

Compounding

Starting capital, return rate, number of periods → final value and growth curve.

HOW IT WORKS

Compound Annual Growth Rate is the smooth annual rate that would take your starting value to your ending value over the period. CAGR = (end / start)^1/years − 1. Unlike the simple "total return ÷ years" people often quote, CAGR accounts for compounding. A 100% return over 5 years isn't 20%/year — it's about 14.87%/year compounded. For trading accounts, CAGR is the most-quoted comparison metric. The S&P 500 sits around 10%/year long-term; matching that with active trading is harder than it looks.

How CAGR differs from average return

CAGR is the constant annual rate that would carry your starting value to your ending value over the period. The formula is (end ÷ start)^(1 ÷ years) − 1. It smooths away the path entirely, which is both its purpose and its limitation.

It differs from dividing total return by years because compounding is multiplicative. Averaging annual returns arithmetically overstates what you actually earned, and the gap widens as returns get more volatile — which is why CAGR, not the simple average, is the standard for comparing track records.

A worked example

An account goes from $25,000 to $41,000 over three years — a 64% total return. Dividing by three suggests 21.3% per year.

The actual CAGR is (41,000 ÷ 25,000)^(1÷3) − 1 = 17.9%. The simple version overstates by more than three percentage points, and the error grows with both the time period and the size of the return. Over a decade the difference between the two figures becomes large enough to change how a track record reads entirely.

Where this calculator misleads you

CAGR hides the path completely. An account that rose smoothly and one that doubled, halved, and recovered can post identical CAGRs while representing utterly different risk. Always read CAGR alongside max drawdown — either number alone is close to meaningless.

It is also distorted by deposits and withdrawals. Adding capital inflates the ending value without reflecting trading performance, so a CAGR computed on raw account balances measures your savings rate as much as your skill. Time-weighted return is the correct measure when cash flows exist.

Short periods produce unstable figures. A 40% gain over four months annualises to something spectacular and entirely meaningless. CAGR needs multiple years before it describes anything durable.

Terms on this page

CAGR: Compound annual growth rate: (end ÷ start)^(1 ÷ years) − 1. The smoothed yearly rate.
Total return: Cumulative gain over the whole period, before annualising.
Time-weighted return: Return that neutralises deposits and withdrawals. The right measure when capital moves in or out.
Path dependence: The fact that identical CAGRs can come from very different equity curves and risk profiles.

FAQ

What is CAGR?

Compound Annual Growth Rate — the smooth annual rate that would take your starting value to your ending value over the period, accounting for compounding. CAGR = (end / start)^(1/years) − 1.

Why isn't CAGR just total return ÷ years?

Compounding. A 100% return over 5 years isn't 20% / year — it's about 14.87% / year compounded. The simple version overstates the actual annual rate, sometimes dramatically.

What's a good CAGR for an active trader?

The S&P 500 sits around 10% / year long-term. Matching that with active trading is harder than it looks; beating it sustainably over a decade is rare-air territory.

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