Turn a total gain into the smooth annual rate that lets you compare investments.
A rate-of-return calculator finds the annualized return (CAGR) between a starting and ending value over a number of years, the smooth yearly rate that makes investments of different lengths comparable.
A total return hides the role of time: doubling your money is excellent in three years and mediocre in twenty. CAGR restates any total gain as the constant annual rate that would produce it, which is the only fair way to compare a short holding against a long one. Always judge investments on the annualized figure.
CAGR assumes a single deposit and withdrawal with nothing added or removed in between, so it doesn't reflect the timing of contributions, for that, a money-weighted return is needed. It also ignores fees, taxes, and the volatility along the way; two investments with the same CAGR can feel very different if one was far bumpier.
Divide the ending value by the starting value, raise it to the power of one over the number of years, and subtract one. The calculator does it for you.
Total return is the overall percentage gain; annualized (CAGR) is the smooth yearly rate that produces it, the fair way to compare different holding periods.
No, it assumes a single start and end amount. For portfolios with contributions, a money-weighted return is more accurate.
See the exact formula and a worked example on our methodology page.