Annualized Rate of Return Calculator

Finance

The Annualized Rate of Return Calculator (CAGR) tells you the average yearly growth rate of an investment over a holding period. It accounts for compounding, so it answers: at what steady annual rate would your beginning value have to grow to reach your ending value? The formula used is: CAGR = (ending value ÷ beginning value)^(1 ÷ years) − 1.

Formula

CAGR = (Ending Value ÷ Beginning Value)^(1 ÷ Years) − 1
  • The Annualized Rate of Return Calculator updates instantly when you change any value.
  • Formula: CAGR = (Ending Value ÷ Beginning Value)^(1 ÷ Years) − 1
  • Input definitions: • Beginning Value: what the investment was worth at the start • Ending Value: what it is worth now (or at the end of the period) • Holding Period: the number of years between the two values
  • CAGR smooths out volatility into a single steady annual growth rate — it does not reflect the ups and downs along the way.
  • Total return is the simple percentage gain over the whole period, ignoring compounding.
  • Practical tip: use CAGR to compare investments held for different lengths of time on an equal footing.

Example Calculation

Inputs
  • Beginning Value (PKR): 100000
  • Ending Value (PKR): 150000
  • Holding Period (Years): 5

An investment grows from PKR 100,000 to PKR 150,000 over 5 years. CAGR = (150,000 ÷ 100,000)^(1/5) − 1 = 8.45% per year, even though the total return over the full period is 50%.

Frequently asked questions

What is the annualized rate of return?
It is the constant yearly growth rate (CAGR) that would turn your beginning value into your ending value over the holding period, assuming the gains compound each year.
How is CAGR different from total return?
Total return is the overall percentage gain. CAGR converts that into an average per-year rate, which makes it easy to compare investments held for different periods.
When should I use this calculator?
Use it to measure how well an investment, fund, or portfolio has performed per year, or to compare options with different time horizons.
What values should I enter?
Enter the starting value, the ending value, and the number of years held. The currency cancels out, so any consistent unit works.
Does CAGR account for deposits or withdrawals?
No. CAGR assumes a single lump sum that grows untouched. For cash flows in and out, use an internal rate of return (IRR) instead.