Three calculations
- Annualized return (CAGR): (end ÷ start)^(1 ÷ years) − 1. 10,000,000 growing to 25,000,000 in five years is about 20.1% a year.
- Time to reach a goal: given principal, return and deposits, find the first period the target is reached.
- Required return: back-solve the per-period return needed to hit the target with your principal, deposits and time.
Reading CAGR
CAGR uses only the start and end, ignoring a −30% dip or a +50% spike along the way. The same CAGR can hide very different paths, so look at volatility and maximum drawdown too.
A reality check on goals
If the required return exceeds 30–50% a year, sustaining it is extremely hard. Lowering the goal or extending time and deposits is more realistic. This calculation does not forecast returns.
FAQ
How is CAGR different from average return?
Average return is the arithmetic mean of yearly returns; CAGR is the actual compound pace. The more volatile, the larger the gap.
When are deposits added?
At the end of each period, compounding from the next.
It says the goal is unreachable.
With a zero or negative return and no deposits you can never get there.
Can I use months?
Yes — switch the unit to months for monthly return and deposits.