Free annual rate of return calculator
Calculate the annualized rate of return on any investment — enter starting and ending values and the number of years, updated live, as you type.
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CAGR is a smoothed rate and doesn't reflect actual year-to-year volatility. Past returns don't predict future performance.
Results are estimates. Consult a professional.
How the annual rate of return calculator works
The annual rate of return (ARR) — also called the Compound Annual Growth Rate or CAGR — converts the total growth of an investment over multiple years into a single equivalent yearly rate. It answers: 'What consistent annual return would have produced the same result?'
Worked example: $8,000 grows to $14,500 in 7 years
You invest $8,000 in a fund. Seven years later the account is worth $14,500. What was your annualised rate of return?
Growth of $10,000 at various annual rates of return
The table shows what a $10,000 starting investment grows to at different ARRs over 5, 10, and 20 years, illustrating the powerful effect of compounding over longer horizons.
| Annual Rate | After 5 Years | After 10 Years | After 20 Years |
|---|---|---|---|
| 5% | $12,763 | $16,289 | $26,533 |
| 7% | $14,026 | $19,672 | $38,697 |
| 9% | $15,386 | $23,674 | $56,044 |
| 12% | $17,623 | $31,059 | $96,463 |
Source: FV = $10,000 × (1 + ARR)ⁿ; rounded to nearest dollar.
Tips for evaluating your annual rate of return
ARR is one of the most useful benchmarks for comparing investments, but it can be misleading if misread. These five tips help you use it correctly.
- Always compare ARR over the same period — a 5-year ARR and a 20-year ARR for the same fund will differ; ensure time frames match when benchmarking.
- Account for fees before calculating — compute ARR using the net ending value after management fees, not the gross return; a 10% gross with 1.5% fees is really 8.5%.
- Adjust for inflation to find real returns — divide by (1 + inflation rate) to convert a nominal ARR into a real ARR that reflects true purchasing-power gain.
- Don't confuse ARR with average annual return — the arithmetic average of annual returns will always be higher than the CAGR; only the CAGR reflects actual compounded wealth.
- Include dividends in the ending value — if dividends were reinvested, use the total-return ending value; excluding them dramatically understates ARR for dividend-paying assets.
Accuracy and limitations
ARR assumes smooth, continuous growth at a fixed rate between the start and end dates. It does not capture volatility, drawdown risk, or intermediate cash flows such as dividends received in cash, partial withdrawals, or additional deposits. If you added money during the period, a money-weighted rate of return (MWRR/IRR) will give a more accurate picture than a simple ARR calculation.
For the most accurate picture, use the total-return ending value — one that includes dividends reinvested and any capital gains distributions — rather than price appreciation alone.
Not financial advice — consult a financial professional for your specific situation.
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