What is a good CAGR for a long-term investment portfolio?

The S&P 500 has delivered approximately 10% nominal CAGR over its full history since 1926. After inflation, the real CAGR is approximately 7%. A diversified portfolio of stocks and bonds targeting 6% to 8% nominal CAGR is a reasonable long-term expectation. Individual stock selection, sector concentration, and international exposure can produce significantly higher or lower results.

How is CAGR different from IRR?

CAGR measures the constant growth rate between two fixed points in time -- a beginning and ending value. IRR (Internal Rate of Return) is used when cash flows occur at multiple points in time and measures the rate that makes the net present value of all cash flows equal to zero. For a simple lump-sum investment with no intermediate cash flows, CAGR and IRR produce the same result.

What does the Rule of 72 tell me?

The Rule of 72 estimates how many years it takes to double your money at a given CAGR by dividing 72 by the annual growth rate percentage. At 6% CAGR, money doubles in approximately 12 years. At 9% CAGR, it doubles in 8 years. At 12%, in 6 years. This approximation works well for rates between 3% and 30% and provides quick intuition about compounding power.

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CAGR Calculator

Calculate the Compound Annual Growth Rate of an investment from beginning value, ending value, and time period.

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Introduction

When a fund manager says their portfolio returned an average of 12% annually over five years, that number is almost certainly the arithmetic average -- not the compound annual growth rate. These are not the same thing. A portfolio that gains 50% one year and loses 33% the next has an arithmetic average of 8.5%, but a CAGR of exactly 0%. The money went nowhere. CAGR is the single most honest metric for comparing investment performance because it accounts for the compounding nature of growth and the drag of down years. According to FINRA's investor education guidelines, understanding the difference between average returns and compound returns is essential for realistic financial planning. This calculator computes precise CAGR from any beginning and ending value over any time period, alongside total return, Rule of 72 doubling time, and the inverse calculation for projecting ending value at a target CAGR.

What This Calculator Does

This CAGR calculator determines the Compound Annual Growth Rate of any investment given a beginning value, ending value, and time period in years. It also computes total percentage return, absolute dollar gain or loss, Rule of 72 doubling time, and runs the inverse calculation -- projecting the ending value of any beginning investment at a target CAGR over a chosen number of years. Both forward (what CAGR did I earn?) and backward (what will my investment be worth?) modes are supported.

The Formula

CAGR = (Ending Value / Beginning Value)^(1 / Years) - 1 | Doubling Time = 72 / CAGR%

CAGR is derived from the compound interest formula rearranged to solve for rate. Raising the ratio of ending to beginning value to the power of (1 / years) extracts the per-year growth rate that, if applied consistently, produces the same ending value. The result minus 1 gives the decimal growth rate. Multiply by 100 for the percentage. The Rule of 72 estimates doubling time by dividing 72 by the annual growth rate -- a mental math shortcut accurate to within a few percent for rates between 3% and 30%.

Step-by-Step Example

Standard CAGR calculation

Beginning value: $25,000 (initial investment in 2019). Ending value: $47,800 (current value in 2026). Time: 7 years. CAGR = ($47,800 / $25,000)^(1/7) - 1 = 1.912^0.1429 - 1 = 9.65%.

Interpret the result

9.65% CAGR. Total return: ($47,800 - $25,000) / $25,000 = 91.2%. Absolute gain: $22,800. Rule of 72 doubling time at this rate: 72 / 9.65 = 7.5 years.

Compare to benchmark

S&P 500 CAGR from 2019 to 2026 was approximately 12.8%. Your portfolio's 9.65% CAGR underperformed by 3.15 percentage points per year. Over 7 years, that gap compounds to roughly $8,500 in foregone growth on the $25,000 starting investment.

Inverse projection

Target CAGR: 8%. Starting amount: $50,000. Time: 20 years. Ending value: $50,000 x (1.08)^20 = $50,000 x 4.661 = $233,050. This is the inverse function: what will your investment be worth at a specific CAGR?

Real-World Use Cases

Comparing Portfolio Performance to Index Benchmarks

An investor reviews their stock portfolio over 10 years: beginning value $80,000, ending value $198,000. CAGR: 9.44%. S&P 500 10-year CAGR over the same period: 12.2%. The gap (2.76%/year) compounded over 10 years means the investor's portfolio is $52,000 below where it would have been in an index fund -- a meaningful case for reviewing active stock selection.

Business Revenue Growth Analysis

A startup's revenue grew from $420,000 in Year 1 to $3.2 million in Year 5. CAGR: ($3,200,000 / $420,000)^(1/4) - 1 = 66.7%. This metric is more useful to investors than saying 'revenue increased 662%' because it shows the consistent annual rate behind that total growth.

Setting a Savings Growth Target

A 40-year-old has $120,000 saved and needs $800,000 by age 65 (25 years). Required CAGR: ($800,000 / $120,000)^(1/25) - 1 = 7.94%. This target guides asset allocation -- a 7.94% CAGR is historically achievable with a diversified stock-heavy portfolio but requires staying invested through downturns.

Comparison

Investment / Benchmark	Time Period	CAGR	Total Return	Rule of 72 Doubling
S&P 500 (1926-2024)	98 years	~10.2% nominal	~$1M from $1,000	~7 years
S&P 500 (inflation-adj)	1926-2024	~7.0%	Real wealth multiple	~10 years
US Treasury 10-Year (avg)	Long-term	~3.5% to 5.0%	Lower, stable	~15-20 years
Real estate (US avg)	1963-2024	~4.5%	Varies by location	~16 years
Gold	1971-2024	~7.7%	Above inflation	~9 years
Bitcoin (2015-2024)	9 years	~77% (extreme volatility)	Exceptional, extreme risk	~1 year

Common Mistakes to Avoid

Confusing arithmetic average return with CAGR. A portfolio returning +50%, -33%, +50%, -33% has an arithmetic average of +8.5% but a CAGR of 0%. The arithmetic average ignores the order and compounding of returns; CAGR does not.
Using CAGR for very short periods (under 2 to 3 years). With limited data points, CAGR can be dramatically skewed by a single strong or weak year and does not provide a reliable signal about long-term trajectory.
Not adjusting CAGR for inflation. A nominal CAGR of 7% in a 3% inflation environment represents only 4% real growth in purchasing power. For retirement planning purposes, real (inflation-adjusted) CAGR is the more meaningful number.
Treating CAGR as a guaranteed future return rate. CAGR is a historical smoothing metric. Future returns will be volatile and will deviate significantly from the historical compound rate in any given year.

Frequently Asked Questions

Accuracy and Disclaimer

CAGR is a historical performance metric that smooths actual returns into an equivalent constant growth rate. Past CAGR does not predict future returns. Actual investment performance varies significantly year to year due to market conditions, economic factors, and investment-specific risks. This calculator is for educational and analytical purposes only and does not constitute investment advice.

Conclusion

CAGR gives you a standardized way to compare investment performance across different time periods and asset classes. Use it to benchmark your portfolio returns against the S&P 500 historical CAGR of approximately 10% nominal or 7% inflation-adjusted. For modeling how consistent CAGR applies to your retirement savings over time, the Safe Withdrawal Rate Calculator uses similar compound growth logic to project whether your portfolio sustains retirement income. The Expense Ratio Impact Calculator shows how even a small reduction in CAGR from fund fees compounds into significant wealth loss over decades.