Compound Annual Growth Rate — the smoothed annual rate of return between a starting value and an ending value over a number of years. The formula is CAGR = (ending ÷ starting)^(1/years) − 1. It assumes the investment grew at exactly that rate every year, even though actual returns are usually lumpy.

What's the difference between CAGR and average return?

CAGR compounds; average return doesn't. If you earn 100% in year one and lose 50% in year two, the simple average is 25% — but you actually ended up exactly where you started (R100 → R200 → R100). CAGR correctly shows 0%. For any return series involving losses or different-sized gains, CAGR is the honest number. Simple average overstates real performance.

Why use CAGR instead of total return?

Total return alone ("the investment doubled!") doesn't tell you how impressive that is without knowing the time period. Doubling over 7 years is around 10% CAGR — strong but not extraordinary. Doubling over 30 years is around 2.3% CAGR — barely keeping up with SA inflation. CAGR normalises returns to a common unit (annual rate) so investments of different durations are comparable.

What's a good CAGR in South Africa?

Depends on the asset class. SA equities (JSE) have historically returned ~10–15% CAGR over long periods. SA bonds and money market run closer to 7–9%. Property: varies widely by location, ~6–10% on capital growth excluding rental income. Cash savings: 5–8% depending on the account. Inflation has averaged 4–6%. To grow real purchasing power, your CAGR needs to clear inflation comfortably.

Does CAGR include dividends?

Only if you include them. If you're calculating CAGR for an investment with dividends or interest paid out (rather than reinvested), the calculator only sees capital growth — it'll understate the true return. To get total-return CAGR, use the ending value as if all dividends/interest had been reinvested back into the investment. Some price indices and tools quote this as "total return" or "accumulating" versions for exactly this reason.

How do I work out my real (inflation-adjusted) CAGR?

Subtract the inflation CAGR from your investment CAGR. If your investment returned 10% CAGR over 5 years and CPI averaged 5% over that period, your real CAGR is roughly 5%. The exact maths uses the Fisher equation — (1 + nominal) ÷ (1 + inflation) − 1 — but the subtraction approximation works for most practical comparisons.

Can CAGR be negative?

Yes — when the ending value is less than the starting value. R100,000 invested becomes R75,000 after 4 years: CAGR = (0.75)^(1/4) − 1 ≈ −7.0%. The investment lost roughly 7% per year compounded. Negative CAGR is honest; "average loss" understates the damage the same way average gain overstates the upside.

Should I use CAGR for short periods?

Use with caution. CAGR over 1–2 years magnifies noise. A R100 → R200 jump in 18 months computes to a wild 50%+ CAGR, but extrapolating that as a future expectation would be foolish. CAGR is most meaningful over 5+ years, where short-term fluctuations smooth out. For sub-1-year measurement, just use total return.

Is the data I enter saved anywhere?

No. Every calculation runs entirely in your browser. We never see the numbers you type, and nothing is stored on a server.

Savings & Investments

CAGR Calculator (South Africa)

What was the annual return on that investment? CAGR — compound annual growth rate — is the only honest answer when the period is more than a year and the returns weren’t smooth.

Starting value

What the investment was worth at the start.

Ending value

What it's worth now (or at the end of the period).

Number of years

Use a decimal for fractional years (3.5 = three-and-a-half years).

Compound annual growth rate

0.00%

fill in all three fields above

Total return: 0.00%as a percentage of the starting value
Absolute change: R 0,00Rand difference between starting and ending value

All calculations run in your browser. CAGR assumes smooth compound growth — actual year-by-year returns vary, sometimes wildly.

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Key takeaways

CAGR = (end ÷ start)^(1/years) − 1. It's the smooth annual rate that, compounded, takes you from start to end. The honest comparison number for investments of different durations.
Simple average return overstates performance when there are losses. Up 100%, then down 50% = back where you started. Average says +25%; CAGR says 0%. Always trust CAGR.
SA equity returns (JSE) have historically averaged 10–15% CAGR long-term, bonds 7–9%, cash 5–8%, inflation 4–6%. Anything below inflation is shrinking your real purchasing power.
If your investment pays dividends or interest, include them in the ending value (assume reinvested) to capture total return. Capital-only CAGR understates real performance.
CAGR over short periods (under 5 years) magnifies noise. Most useful for genuine multi-year performance comparisons.

The honest return number

What CAGR actually tells you

CAGR — compound annual growth rate — answers a deceptively simple question: if an investment had grown smoothly at exactly one annual rate, what would that rate be? The maths backs out the rate from the start value, end value, and elapsed time. That single number lets you compare investments held over wildly different periods on the same scale.

The formula

CAGR = (ending value ÷ starting value)^(1 ÷ years) − 1

R100,000 grew to R180,000 over 5 years. CAGR = (1.8)^(0.2) − 1 = 12.5%. The investment effectively earned 12.5% every year, compounded.

Why simple average is dishonest

The classic trap: average returns can’t reflect what actually compounded. A worked example:

Year 1: +100%. R100 becomes R200.
Year 2: −50%. R200 becomes R100.
Simple average: (100 + −50) ÷ 2 = 25%.
Reality: you ended up exactly where you started. CAGR = 0%.

Anyone telling you about “average returns” on an investment with lumpy performance is either being careless or selling something. CAGR is the only honest measure once losses are involved — and over real market cycles, losses are always involved.

SA asset-class benchmarks

Rough long-term CAGRs across SA asset classes, as starting reference points (real returns vary):

JSE equities — 10–15% nominal CAGR over rolling 10-year periods, with significant volatility year-to-year.
SA government bonds — 7–9% nominal, lower volatility.
Money market and cash — 5–8% nominal, tracking the repo rate plus a margin.
Property (capital) — 6–10% capital growth, varies widely by region. Rental income is on top.
Inflation (CPI) — 4–6% has been the recent long-run average.

The implication: anything earning a nominal CAGR under inflation is shrinking in real purchasing power. A 4% return in a 6% inflation environment is a 2% real loss every year.

Real vs nominal CAGR

Nominal CAGR is what your statement shows. Real CAGR is what your purchasing power did. The exact relationship is the Fisher equation:

real CAGR = (1 + nominal CAGR) ÷ (1 + inflation CAGR) − 1

The practical approximation: real CAGR ≈ nominal CAGR − inflation. A 12% nominal return in a 5% inflation environment is roughly a 7% real return. For longer horizons or higher inflation regimes, the approximation drifts — use the Fisher equation when precision matters.

CAGR vs IRR

CAGR assumes one cash inflow at the start and one outflow at the end. IRR (internal rate of return) handles multiple cash flows in and out at different times — which is the right tool when you’ve been adding to or drawing from the investment along the way. For a simple buy-and-hold, CAGR and IRR converge to the same number. For monthly retirement contributions, IRR (or money- weighted return) is the honest measure; CAGR distorts when applied to a contribution stream.

The horizon honesty

CAGR rewards long horizons. A R100,000 → R250,000 investment over 30 years is a 3.1% CAGR — barely beating inflation. The same return in 10 years is 9.6% CAGR — strong performance. Same Rand difference, dramatically different annual rate. When someone quotes a return, always ask the period.

Frequently asked questions

What is CAGR?
Compound Annual Growth Rate — the smoothed annual rate of return between a starting value and an ending value over a number of years. The formula is CAGR = (ending ÷ starting)^(1/years) − 1. It assumes the investment grew at exactly that rate every year, even though actual returns are usually lumpy.
What's the difference between CAGR and average return?
CAGR compounds; average return doesn't. If you earn 100% in year one and lose 50% in year two, the simple average is 25% — but you actually ended up exactly where you started (R100 → R200 → R100). CAGR correctly shows 0%. For any return series involving losses or different-sized gains, CAGR is the honest number. Simple average overstates real performance.
Why use CAGR instead of total return?
Total return alone ("the investment doubled!") doesn't tell you how impressive that is without knowing the time period. Doubling over 7 years is around 10% CAGR — strong but not extraordinary. Doubling over 30 years is around 2.3% CAGR — barely keeping up with SA inflation. CAGR normalises returns to a common unit (annual rate) so investments of different durations are comparable.
What's a good CAGR in South Africa?
Depends on the asset class. SA equities (JSE) have historically returned ~10–15% CAGR over long periods. SA bonds and money market run closer to 7–9%. Property: varies widely by location, ~6–10% on capital growth excluding rental income. Cash savings: 5–8% depending on the account. Inflation has averaged 4–6%. To grow real purchasing power, your CAGR needs to clear inflation comfortably.
Does CAGR include dividends?
Only if you include them. If you're calculating CAGR for an investment with dividends or interest paid out (rather than reinvested), the calculator only sees capital growth — it'll understate the true return. To get total-return CAGR, use the ending value as if all dividends/interest had been reinvested back into the investment. Some price indices and tools quote this as "total return" or "accumulating" versions for exactly this reason.
How do I work out my real (inflation-adjusted) CAGR?
Subtract the inflation CAGR from your investment CAGR. If your investment returned 10% CAGR over 5 years and CPI averaged 5% over that period, your real CAGR is roughly 5%. The exact maths uses the Fisher equation — (1 + nominal) ÷ (1 + inflation) − 1 — but the subtraction approximation works for most practical comparisons.
Can CAGR be negative?
Yes — when the ending value is less than the starting value. R100,000 invested becomes R75,000 after 4 years: CAGR = (0.75)^(1/4) − 1 ≈ −7.0%. The investment lost roughly 7% per year compounded. Negative CAGR is honest; "average loss" understates the damage the same way average gain overstates the upside.
Should I use CAGR for short periods?
Use with caution. CAGR over 1–2 years magnifies noise. A R100 → R200 jump in 18 months computes to a wild 50%+ CAGR, but extrapolating that as a future expectation would be foolish. CAGR is most meaningful over 5+ years, where short-term fluctuations smooth out. For sub-1-year measurement, just use total return.
Is the data I enter saved anywhere?
No. Every calculation runs entirely in your browser. We never see the numbers you type, and nothing is stored on a server.

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