If an investment grew from 100,000 to 185,000 over seven years, the total return is easy: 85,000 of gain on 100,000 invested, or 85%. That figure answers how much did I make. It says nothing about how good the investment was, because 85% over seven years and 85% over two years are wildly different outcomes.
The comparable number is the compound annual growth rate, the single steady rate that would have taken you from start to finish:
CAGR = (End ÷ Start)^(1 ÷ years) − 1
Using those figures: 185,000 ÷ 100,000 = 1.85. Raised to the power of 1/7 gives 1.0919. Subtract one and the answer is 9.19% a year.
You can check it by compounding forward: 100,000 × 1.0919 raised to the seventh power returns 185,000. That is what makes CAGR useful — it is the number you can put side by side with a savings rate, a bond yield, or an index return over the same period.
CAGR is a nominal return. If inflation averaged 5% over the same seven years, the real return is not 9.19 minus 5. The correct adjustment divides rather than subtracts:
Real return = (1 + nominal) ÷ (1 + inflation) − 1
So 1.0919 ÷ 1.05 − 1 = 3.99% a year. In purchasing-power terms, 185,000 after seven years of 5% inflation buys what 131,477 bought at the start. Your real gain was about 31%, not 85%. The subtraction shortcut would have said 4.19% — close enough for a rough check, but the gap widens as rates rise, and at high inflation it becomes seriously misleading.
| Measure | Value | What it answers |
|---|---|---|
| Total nominal return | 85.0% | How many currency units did I gain |
| Nominal CAGR | 9.19% a year | How does this compare to other investments |
| Real CAGR at 5% inflation | 3.99% a year | Did I actually get wealthier |
| End value in start-year money | 131,477 | What it can actually buy |
CAGR is a smoothed average, and smoothing hides the thing that most affects real investors — volatility. Two portfolios can share a CAGR of 9.19% while one moved in a straight line and the other halved in year three. The sequence matters enormously if you had to sell during the drawdown.
It also breaks in specific situations:
This calculates arithmetic on the numbers you provide. It does not know your fees, your tax position, your dividend reinvestment, or your currency exposure, and it cannot say whether the return was adequate compensation for the risk taken — that requires knowing how volatile the holding was. Past return is not a forecast. Nothing here is financial advice; for decisions involving significant money, speak to a regulated adviser who can see your whole position.
Only meaningful against a benchmark. Broad global equity markets have historically returned around 7 to 10% a year nominally over long periods, with severe multi-year drawdowns along the way. Beating cash after inflation and fees is the honest bar for taking equity risk.
Almost certainly because it uses a money-weighted method that accounts for the dates of your deposits, or because it is reporting after fees while you calculated before them. Both can be correct answers to different questions.
Use the total-return end value, meaning the value assuming dividends were reinvested. Comparing a price-only figure against a total-return index understates your performance, sometimes by two percentage points a year.
No. The calculation runs in your browser and no values are transmitted or saved.
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