Average Return Calculator (CAGR)
The average annual growth rate of an investment over several years.
Tip: CAGR 'smooths' fluctuations — it shows the steady annual rate that would have given the same final result.
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About this digital tool
The average return (CAGR) calculator shows the average annual growth rate of an investment from start to finish, as if growth had been steady every year. Enter the starting value, the ending value and the number of years, and the tool calculates CAGR = (ending value ÷ starting value)^(1/years) − 1. This smooths out the effect of year-to-year swings.
It is used to evaluate investment funds, shares, a business's revenue or a property's price over the years, and to compare investments of different durations. CAGR does not show the risk or the swings along the way, so it should be read carefully. The result is an estimate and not a guarantee for the future.
How to use
- Enter the starting value and the final value.
- Set the number of years.
- See the average annual return (CAGR).
Frequently asked questions
What is the difference between CAGR and the arithmetic average return?
The arithmetic average takes the mean of annual returns. CAGR calculates the single rate that would have produced the real growth — usually lower but more accurate.
How is CAGR calculated?
Divide the final value by the starting value, raise to the power 1/years and subtract 1. If 100,000 lek becomes 200,000 lek in 5 years, CAGR is about 14.9% a year.
Why does CAGR differ from the arithmetic average?
Because it accounts for compounding: each year's growth is calculated on the previous year's value. The arithmetic average exceeds CAGR when there is volatility.
Does CAGR guarantee future returns?
No. It is only a historical summary and does not show risk or volatility. Use it for comparison, not as a sure forecast.