Enter your actual year-by-year investment returns and find out your real compounded annual growth rate. See exactly what your portfolio earned, including the years it did not.
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Average Return Calculator (CAGR)Enter your actual annual returns below
Load a preset scenario or enter your own returns
Number of years
Enter your annual return for each year (as a percentage, e.g. 12 for 12%, -8 for a loss year)
Starting portfolio value$10,000
How much you started with at the beginning of this period
Your compounded annual growth rate (CAGR)
0%
over 10 years
Starting value
$0
Ending value
$0
Total return
0%
Simple average
0%
Best year
0%
Worst year
0%
Year-by-year returns
Understanding CAGR
Why your average return is not what you think
Most people calculate their investment return by simply averaging their annual percentages. If you made 20% one year and lost 20% the next, the simple average is 0%, which sounds like you broke even. But you did not. You actually lost money.
Here is why. If you started with $10,000 and gained 20%, you now have $12,000. If you then lost 20%, you lose $2,400, leaving you with $9,600. A simple average of 0% hides a real loss of 4%. This is called volatility drag, and it is why the Compound Annual Growth Rate (CAGR) is the only honest way to measure investment returns.
CAGR tells you the single constant rate that would have produced the same result as your actual variable returns. It accounts for compounding and for the asymmetry between gains and losses. It is the number professional investors and fund managers use when reporting performance.
CAGR vs simple average
The simple average of your annual returns overstates your actual performance whenever there is volatility. A portfolio that gained 50% then lost 33% has a simple average return of 8.5%, but the CAGR is exactly 0% — because it ended exactly where it started. Always use CAGR when evaluating real investment performance.
Loss years hurt more than gain years help
Losing 50% requires a 100% gain just to break even. This asymmetry is why avoiding large drawdowns matters as much as capturing large gains. A portfolio that returns 10% every year for ten years will outperform one that returns 25% some years and loses 15% in others, even if the simple average of the second portfolio looks higher.
Benchmark your CAGR
Once you know your CAGR, compare it to the S&P 500. The index has returned approximately 10% CAGR over the past fifty years. If your active portfolio consistently underperforms this benchmark, a low-cost S&P 500 index fund like VOO would have served you better with less effort and lower fees. Many active portfolios do not beat the index over long periods.
Frequently asked questions
What people ask about average returns
What is CAGR and why does it matter?+
CAGR stands for Compound Annual Growth Rate. It is the rate at which an investment would have grown if it had grown at a steady rate each year, producing the same end result as your actual variable returns. It matters because it is the honest measure of investment performance. Simple averages can be misleading, especially when some years involve significant losses. CAGR removes the distortion and gives you a single comparable number that reflects what actually happened to your money.
How is CAGR calculated?+
The CAGR formula is: CAGR = (Ending Value / Beginning Value)^(1/Years) minus 1. If you started with $10,000 and ended with $21,589 after 10 years, your CAGR is ($21,589 / $10,000)^(1/10) minus 1, which equals approximately 8% per year. This calculator does the same calculation based on your actual year-by-year returns and starting portfolio value.
What is a good CAGR for an investment portfolio?+
The S&P 500 has produced a CAGR of approximately 10% per year over the past fifty years. This is the benchmark most long-term equity investors should measure themselves against. A CAGR above 10% on a diversified portfolio over many years is genuinely excellent. A CAGR between 7 and 10% is solid. Below 7% over a long period may suggest that a simple index fund would have outperformed your strategy. Always compare your CAGR to the relevant benchmark for the type of investments you hold.
Why is my CAGR lower than my simple average return?+
This is normal and expected whenever there is any volatility in your returns, which is almost always. The gap between your simple average and your CAGR is called volatility drag. The more variation in your year-by-year returns, the larger the gap. A portfolio with returns of 30%, -20%, 40%, -10% has a simple average of 10%, but a CAGR of only about 6.5%. Reducing volatility, especially by avoiding large loss years, is one of the most powerful ways to improve your real compounded returns.
How does this compare to the S&P 500?+
The S&P 500 returned approximately 13.6% CAGR from 2015 to 2024, including the crash of 2020 and the downturn of 2022. Over the past fifty years, its long-run CAGR is approximately 10%. Load the S&P 500 preset to see what returns look like over a realistic decade, then compare with your own numbers. If your CAGR consistently falls short of the index, it may be worth considering whether an index fund like VOO or SPY would serve your financial goals better than your current approach.
The honest truth about returns
Know what you actually earned
Most investors overestimate their returns because they remember the good years more clearly than the bad ones, and because simple averages hide the real impact of losses. This calculator gives you the honest number, CAGR, which is what the investment actually produced for you.
Knowing your real return is the starting point for every good investment decision. If your portfolio is underperforming the index, you now have the data to act on it. If it is outperforming, you have the evidence to understand why and replicate it.
Want to build better returns?
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