You've probably seen the graph in your broker's website which shows the development of your portfolio. And it shows the total percentage gain over the period.

Then you're perhaps wondering - how much have I been earning per year? How well have my investments been doing compared to the market?

One way of measuring that is by calculating your portfolio's compounded annual growth rate - the CAGR for short.

How do I calculate my CAGR when I know how much my portfolio has gained over a period?

As an example, our broker shows us the following graph for the total development for the portfolio of one of us.

It shows that over the last five years the total return of the portfolio has been 197.81%, while the market has gained 73.21%. If we want to calculate the CAGR we can do as follows.

Go to  https://cagrcalculator.net/

Type in 100 as starting value.

Let your ending value be your percentage gain over the period, and add 100 to it. For example, a 120% gain would make your ending value equal to 220.

Let no. of periods be the amount of years you are measuring over.

In our case, the form would look like this:

When you hit calculate you'll get the result.

It shows that our portfolio gained 24.39% compounded annually over the last five years. The Dow Jones World Index gained 11.61% per year.

If I know the value of my holdings at the start and now, how do I calculate the CAGR? For example I start with $100,000 and now after 4 years I have $131.123.

Do the following:

Go to https://cagrcalculator.net/ and make the following inputs.

Staring investment value: 100.000

Ending investment value: 131.123

No. of periods: 4

Hit Calculate

This example would have had a CAGR of 7.01%.

Notice that the simple growth rate would be about 7.74% (31.1% / 4). You see that you need a smaller CAGR to compound with every year than the simple growth rate to reach the end value.