Investment Details
Year-by-Year Projected Values
| Year | Projected Value | Growth |
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Breakdown
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What Is CAGR?
Compound Annual Growth Rate (CAGR) represents the rate at which an investment would have grown if it had grown at a steady rate every year. It smooths out the volatility of year-to-year returns to give you a single, comparable annual rate.
Where n is the number of years. Unlike a simple average of annual returns, CAGR accounts for the compounding effect — the fact that returns in later years are earned on a larger base.
CAGR vs Average Annual Return
Many investors confuse CAGR with the arithmetic average of yearly returns. These two metrics can paint very different pictures:
Example: You invest $10,000. In Year 1 it grows 60% to $16,000. In Year 2 it drops 40% to $9,600.
Average annual return: (60% + (−40%)) / 2 = 10% — sounds great!
CAGR: ($9,600 / $10,000)1/2 − 1 = −2.02% — the reality is you lost money.
The average annual return is misleading because it ignores compounding. CAGR always reflects your actual experience as an investor.
How to Use This Calculator
- Enter Beginning Value: The amount you originally invested or the starting value of the asset.
- Enter Ending Value: The final or current value of your investment.
- Enter Duration: Use the number of years directly, or toggle to date mode to enter start and end dates for precise calculation.
- Read Your Results: The calculator shows CAGR, total return percentage, and equivalent simple annual return, plus a year-by-year projection table.
- Compare Investments: Switch to the comparison tab to enter up to 5 investments side-by-side and see their growth curves on a single chart.
What Is a Good CAGR?
Context matters. Here are some benchmarks:
- S&P 500 (historical): ~10% nominal, ~7% inflation-adjusted
- US Real Estate (historical): ~3-4% above inflation
- High-yield Savings: ~4-5% (varies with interest rates)
- Individual Stocks: Top performers can achieve 15-25%+, but with higher risk
A CAGR above 10% is generally considered strong for long-term equity investments. For lower-risk assets like bonds, 4-6% may be excellent. Always compare within the same asset class and risk level.
Limitations of CAGR
While CAGR is powerful, it has limitations to be aware of:
- It assumes a smooth growth rate and hides volatility — two investments with the same CAGR can have very different risk profiles.
- It doesn't account for cash flows like additional contributions or withdrawals during the period.
- It only uses two data points (beginning and ending values), ignoring everything that happened in between.
- For investments with ongoing contributions, IRR (Internal Rate of Return) is a more appropriate metric.