/* Favicon */ /* AdSense */

Compound Annual Growth Calculator

Investment return calculator

Investment returns are often quoted over a number of years to sound impressive, but when annualised, they are not so grand.

This CAGR (compound annual growth rate) calculator will provide the compound annual growth rate for an investment return over a number of years. The ASX for example, as of Christmas 2025, has a 5 year investment return of 33%. Passing this through the calculator reveals this to be a meagre 5.9%!

Annual Return Calculator

The calculation here is quite simple, but getting the units right is the trick.

We start with the standard Future Value equation, which relates the Present Value, the periodic Rate of Return, and the Number of periods. Our calculator assume the periods to be years.

FV=PV∗(1+r)nFV = PV*(1+r)^n

We rearrange the subject to equal the Growth, hopefully a positive number, representing the ratio of the Future Value to the Present Value.

Growth=FV/PV=(1+r)nGrowth = FV/PV = (1+r)^n
1+r=Growthn1+r = \sqrt[n]{Growth}
r=Growthn−1r = \sqrt[n]{Growth}-1

So, for example, let’s consider a typical example as follows;

  • Present Value = $1000
  • Future Value = $1800
  • Period = 5 Years

Entering these values into the equation gives us the following:

Growth=(1800/1000)=1.8=(1+r)5Growth = (1800/1000) = 1.8 = (1+r)^5

Rearranging the equation gives us the result.

r=1.85−1=0.1247r = \sqrt[5]{1.8} -1 = 0.1247

That is, an annual compound return of 12.47%

Understanding this is a powerful tool to determinging whether the figures you are being quoted are actually as good as they seem.