Calculate the Compound Annual Growth Rate of an investment to see its smoothed annualized return.
Compound Annual Growth Rate (CAGR) represents the rate at which an investment would have grown if it grew at a steady rate each year. It smooths out the volatility of year-to-year returns into a single number, making it easy to compare different investments.
If a stock goes up 50% one year and down 30% the next, the average annual return is 10%. But your actual ending value is lower than starting (1.50 × 0.70 = 1.05, so CAGR ≈ 2.5%). CAGR reflects reality; average return can be misleading.
| Investment | Historical CAGR |
|---|---|
| S&P 500 (1957-2023) | ~10.5% |
| US Bonds (10-yr) | ~5-6% |
| Gold (1971-2023) | ~7.5% |
| Real Estate (US avg) | ~3-4% |
| Savings Account | ~1-2% |