Calculate annualized returns, project future values, compare investments side-by-side, and benchmark against the S&P 500, bonds, and inflation.
Use these long-term averages to benchmark your investment's CAGR against major asset classes.
An investment that gains 100% then loses 50% has an average annual return of +25% — but your money is exactly where it started (CAGR = 0%). This gap between average return and CAGR widens with volatility, a phenomenon called "volatility drag." CAGR tells you what actually happened to your money. Average return tells you what happened in a typical year. For evaluating real investment performance, CAGR is the only honest metric.
The difference between 8% and 10% CAGR seems small, but over 30 years it is enormous. $10,000 at 8% CAGR becomes $100,627. At 10% it becomes $174,494 — 73% more money from just 2 percentage points of additional annual growth. This is why even small improvements in investment returns compound into massive wealth differences over a career. It also explains why minimizing fees (which reduce CAGR) is one of the most impactful financial decisions you can make.
CAGR works perfectly when you make a single lump-sum investment and measure from start to end. But if you add money regularly (like monthly 401k contributions) or make withdrawals, CAGR does not capture the full picture — it ignores the timing of cash flows. In those cases, use Internal Rate of Return (IRR) or Money-Weighted Return instead. CAGR is best for evaluating buy-and-hold performance, comparing funds, and projecting future values from a single starting amount.
CAGR is calculated using the standard formula: CAGR = (Ending Value / Beginning Value)^(1/Number of Years) − 1. The reverse calculator uses: Future Value = Beginning Value × (1 + CAGR)^Years. All calculations assume no additional contributions or withdrawals during the period.
Historical benchmark figures are approximate long-term averages sourced from publicly available index data. S&P 500 CAGR includes dividend reinvestment. Inflation figure uses US CPI. All values are for educational reference and may not reflect current market conditions.