📊 Stock CAGR Calculator
Calculate the true annualized rate of return for your stock market investments and compare long-term portfolio growth against historical benchmarks.
Annualized Return Analysis
The Mathematics of Geometric Compounding
Compound Annual Growth Rate is calculated using the formula CAGR = (Ending Value / Beginning Value)^(1 / Years) - 1. Unlike average annual return, CAGR accurately accounts for the time value of money and volatility drag.
Frequently asked questions
What is CAGR in stock investing?
CAGR (Compound Annual Growth Rate) represents the annualized constant rate of return required for an investment to grow from its initial value to its ending balance, smoothing out intermediate market volatility.
Why is CAGR better than average annual return?
Arithmetic average returns misrepresent true compounding because negative percentage drawdowns require larger positive gains to recover (e.g., a 50% drop requires a 100% gain to break even). CAGR accurately reflects geometric growth.
What is a good CAGR for a stock portfolio?
Historically, the broad US S&P 500 index has generated an annualized CAGR of approximately 10% before inflation (around 7% real return) over multi-decade periods. Consistently beating this benchmark indicates strong outperformance.
Can CAGR be calculated for periods under one year?
While mathematically possible through annualization, CAGR is designed for multi-year horizons (typically 3 to 10+ years) to smooth out short-term market cycles.