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Monthly CAGR Calculator

Calculate CAGR from months instead of years.

The Monthly CAGR Calculator is a free financial calculator. Calculate CAGR from months instead of years. Plan your finances accurately and make better economic decisions.
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What Is Monthly CAGR?

Monthly Compound Annual Growth Rate (CAGR) calculates the annualized return of an investment based on monthly performance data. Unlike simple average returns, CAGR accounts for compounding — the geometric progression that determines actual wealth accumulation over time.

CAGR answers: "If my investment grew from $10,000 to $18,500 over 4 years, what was my annual return?" The answer isn't 85% ÷ 4 = 21.25% (simple average). It's (18,500/10,000)^(1/4) - 1 = 16.6% CAGR. This is the rate that, if compounded annually, produces the same ending value.

Monthly CAGR is essential for comparing investments with different time periods, evaluating portfolio performance, and setting realistic return expectations. A fund that doubled in 3 years (26% CAGR) outperformed one that gained 80% in 5 years (12.5% CAGR), even though the second has a higher total return. CAGR normalizes for time.

The Monthly CAGR Formula

Standard CAGR formula:

CAGR = (Ending Value / Beginning Value)^(1 / Years) - 1

When working with monthly data, calculate months first, then annualize:

Monthly CAGR = (Ending Value / Beginning Value)^(1 / Months) - 1

Annualized CAGR = (1 + Monthly CAGR)¹² - 1

Where:

  • Ending Value = Final investment value
  • Beginning Value = Initial investment value
  • Months = Total number of months in the period
  • Years = Months ÷ 12

For investments with contributions or withdrawals, use Modified CAGR or IRR instead — standard CAGR assumes a single lump sum with no additional cash flows.

Worked Calculation Example

Calculate CAGR for an investment that grew from $25,000 to $42,800 over 62 months.

  1. Identify inputs: Beginning = $25,000, Ending = $42,800, Months = 62
  2. Calculate total return ratio: $42,800 / $25,000 = 1.712 (71.2% total gain)
  3. Calculate exponent: 1 / 62 = 0.016129
  4. Raise ratio to exponent: 1.712^0.016129 = 1.00871
  5. Subtract 1 for monthly rate: 1.00871 - 1 = 0.00871 = 0.871% monthly
  6. Annualize: (1.00871)¹² - 1 = 1.110 - 1 = 0.110 = 11.0% CAGR

Alternative calculation using years: 62 months ÷ 12 = 5.167 years. CAGR = 1.712^(1/5.167) - 1 = 1.712^0.1935 - 1 = 1.110 - 1 = 11.0%. Both methods produce identical results.

6 Steps to Calculate Monthly CAGR

  1. Determine the beginning value. Use the initial investment amount or portfolio value at the start of your measurement period. For a stock purchase: shares × purchase price. For a portfolio: total account value on the start date. Include all invested capital — if you started with $50,000, that's your beginning value regardless of what you originally contributed years earlier.
  2. Determine the ending value. Use the current value or value at the end of your measurement period. For stocks: shares × current price (include reinvested dividends). For portfolios: total account value including cash, stocks, bonds, and funds. Be consistent — if beginning value included dividends, ending value must too. Use the same valuation methodology for both points.
  3. Count the exact number of months. Calculate months between start and end dates. January 1, 2020 to March 1, 2024 = 50 months (4 years × 12 + 2 months). For precision, count actual days and divide by 30.417 (average days per month). A period from March 15 to November 20 is 250 days ÷ 30.417 = 8.22 months. Precision matters for periods under 2 years.
  4. Calculate the total return ratio. Divide ending value by beginning value. $75,000 / $50,000 = 1.50. This represents the wealth multiple — you have 1.5× your starting amount. A ratio of 2.0 means you doubled your money. A ratio below 1.0 indicates a loss (0.85 = 15% loss). This ratio is the foundation for all subsequent CAGR calculations.
  5. Raise the ratio to the reciprocal of time. Calculate 1 / months (or 1 / years). For 48 months: 1/48 = 0.02083. Raise the return ratio to this power: 1.50^0.02083 = 1.00856. This is the monthly compound rate. The mathematical operation finds the constant monthly growth rate that, when compounded, produces your total return.
  6. Annualize the monthly rate. Convert monthly CAGR to annual: (1 + monthly rate)¹² - 1. For 0.856% monthly: (1.00856)¹² - 1 = 1.1077 - 1 = 10.77% annual CAGR. This allows comparison with annual returns from other investments. Report CAGR as an annualized figure unless specifically discussing monthly performance.

5 Examples With Real Numbers

Example 1: Stock Investment (3-Year Hold)

Bought 100 shares at $85/share on Jan 1, 2021. Sold at $142/share on Jan 1, 2024. Reinvested dividends totaling $847.

  • Beginning Value: 100 × $85 = $8,500
  • Ending Value: (100 × $142) + $847 dividends reinvested = $15,047
  • Months: 36 (exactly 3 years)
  • Return Ratio: $15,047 / $8,500 = 1.770
  • Monthly CAGR: 1.770^(1/36) - 1 = 1.0160 - 1 = 1.60%
  • Annualized CAGR: (1.0160)¹² - 1 = 20.9%

This stock significantly outperformed the S&P 500's ~15% CAGR during the same period. The 20.9% CAGR means the investment grew at an equivalent 20.9% compounded annually.

Example 2: Portfolio Performance (5.5 Years)

Investment portfolio: $180,000 on June 1, 2018. Current value: $295,000 on December 1, 2023. No contributions or withdrawals.

  • Beginning Value: $180,000
  • Ending Value: $295,000
  • Months: 66 (5 years, 6 months)
  • Return Ratio: $295,000 / $180,000 = 1.639
  • Years: 66 / 12 = 5.5
  • CAGR: 1.639^(1/5.5) - 1 = 1.093 - 1 = 9.3%

9.3% CAGR is solid performance, slightly below the S&P 500's historical 10% but reasonable for a diversified portfolio. Over the next 10 years at this rate: $295,000 × (1.093)¹⁰ = $718,000 projected value.

Example 3: Real Estate Investment (8 Years)

Rental property purchased for $285,000, sold for $445,000 after 96 months. Total rental income received: $68,400 (not reinvested).

  • Beginning Value: $285,000
  • Ending Value: $445,000 + $68,400 = $513,400 (total proceeds)
  • Months: 96 (exactly 8 years)
  • Return Ratio: $513,400 / $285,000 = 1.801
  • CAGR: 1.801^(1/8) - 1 = 1.076 - 1 = 7.6%

7.6% CAGR from real estate is reasonable, though this calculation ignores property taxes, maintenance, and selling costs. Net CAGR after 2% annual expenses and 6% selling costs: approximately 5-6%. Real estate's value often lies in leverage (mortgage) and tax benefits, not just appreciation.

Example 4: Cryptocurrency (Volatile 2-Year Period)

Bitcoin investment: $10,000 on Jan 1, 2021. Value on Jan 1, 2023: $16,800.

  • Beginning Value: $10,000
  • Ending Value: $16,800
  • Months: 24 (exactly 2 years)
  • Return Ratio: $16,800 / $10,000 = 1.68
  • CAGR: 1.68^(1/2) - 1 = 1.296 - 1 = 29.6%

29.6% CAGR looks excellent, but this masks extreme volatility. Bitcoin reached $65,000 (up 550%) in late 2021, then crashed 75% to $16,000. CAGR only measures start and end points — it doesn't capture the 80% drawdown an investor endured. Use CAGR alongside maximum drawdown for complete performance assessment.

Example 5: Retirement Account (20-Year Career)

401(k) balance: $45,000 at age 45. Balance at age 65: $385,000. Includes contributions of $1,200/month over 20 years.

  • This example requires IRR, not CAGR, due to ongoing contributions.
  • Total contributions: $1,200 × 240 months = $288,000
  • Beginning: $45,000
  • Ending: $385,000
  • Using financial calculator or spreadsheet IRR function:
  • Monthly IRR: 0.58%
  • Annualized: (1.0058)¹² - 1 = 7.2%

7.2% CAGR is reasonable for a balanced 401(k) portfolio. The account grew $97,000 from investment returns ($385,000 - $45,000 - $288,000 contributions). Compound growth on both initial balance and contributions produced the gain.

4 Common Mistakes to Avoid

  • Using CAGR for investments with cash flows. Standard CAGR assumes one lump sum with no additions or withdrawals. A 401(k) with monthly contributions can't use simple CAGR — the result overstates returns because later contributions had less time to grow. Use IRR (Internal Rate of Return) or Modified CAGR for accounts with cash flows. Excel's XIRR function handles irregular cash flows accurately.
  • Averaging annual returns instead of calculating CAGR. Returns of +20%, -10%, +15%, +25%, -5% average to +9% arithmetic mean. But $10,000 becomes $10,000 × 1.20 × 0.90 × 1.15 × 1.25 × 0.95 = $14,749. CAGR = (14,749/10,000)^(1/5) - 1 = 8.06%, not 9%. Arithmetic average overstates compound growth. Always use CAGR for multi-year performance.
  • Calculating CAGR over too short a period. One-year "CAGR" is just annual return — the compounding adjustment is meaningless. Periods under 3 years produce volatile CAGR figures that don't predict future performance. A fund up 40% in Year 1 shows 40% CAGR, but this isn't sustainable. Use CAGR for 3+ year periods minimum, preferably 5-10 years for meaningful comparison.
  • Ignoring the impact of fees on CAGR. A fund's reported return is typically net of fees, but self-calculated CAGR from account values automatically includes fee impact. If comparing fund-reported CAGR to your calculated CAGR, ensure both are net of fees. A 1% expense ratio reduces CAGR by approximately 1% annually. Over 20 years, 1% fees reduce ending value by ~18%.

5 Professional Tips for Accurate CAGR Analysis

  1. Use CAGR to compare investments with different time periods. Fund A: 85% return over 7 years. Fund B: 52% return over 4 years. Which performed better? CAGR reveals: Fund A = 1.85^(1/7) - 1 = 9.2%. Fund B = 1.52^(1/4) - 1 = 11.0%. Fund B won despite lower total return because it achieved returns in less time. CAGR normalizes for time, enabling fair comparisons.
  2. Calculate CAGR for multiple time periods. Don't just calculate 10-year CAGR — calculate 1-year, 3-year, 5-year, and 10-year. This reveals consistency and recent trends. A fund with 15% (1-yr), 8% (3-yr), 12% (5-yr), 10% (10-yr) CAGRs shows recent outperformance but long-term consistency. A fund with 3% (1-yr), 6% (3-yr), 11% (5-yr), 10% (10-yr) may be experiencing manager drift or strategy decay.
  3. Combine CAGR with standard deviation for risk assessment. Two funds with 10% CAGR aren't equal if one has 8% volatility and the other has 25% volatility. Calculate Sharpe Ratio: (CAGR - Risk-Free Rate) / Standard Deviation. Fund A: (10% - 4%) / 8% = 0.75. Fund B: (10% - 4%) / 25% = 0.24. Fund A delivers the same return with less risk — superior risk-adjusted performance.
  4. Use CAGR for realistic retirement projections. Don't assume 12% returns because the S&P had a great decade. Calculate CAGR over full market cycles (15-20 years). S&P 500 CAGRs: 10 years = 12.5%, 20 years = 9.8%, 30 years = 10.2%, 50 years = 11.1%. Use 7-9% for conservative planning, 10% for moderate, 11-12% for optimistic. Planning with 12% CAGR and achieving 8% creates dangerous shortfalls.
  5. Apply the Rule of 72 for quick CAGR estimates. Years to double = 72 / CAGR. If an investment doubled in 6 years: CAGR ≈ 72/6 = 12%. If you expect 8% CAGR: money doubles in 72/8 = 9 years. This mental math check validates your CAGR calculations. A claimed 25% CAGR over 15 years should produce 2^(15/72×25) = 2^8.3 = 32× return. If actual return is only 10×, the CAGR claim is false.

4 Frequently Asked Questions

CAGR is geometric mean; average return is arithmetic mean. Volatility creates a gap between them. Example: +50% one year, -50% next year. Arithmetic average: 0%. But $100 becomes $150 then $75 — you lost 25%. CAGR = (75/100)^(1/2) - 1 = -13.4%. The more volatile the returns, the larger the gap. CAGR reflects actual wealth accumulation; arithmetic average is misleading for volatile investments.

Yes — CAGR is negative when ending value is less than beginning value. A $10,000 investment worth $7,000 after 5 years: CAGR = (7,000/10,000)^(1/5) - 1 = 0.7^0.2 - 1 = 0.931 - 1 = -6.9%. Negative CAGR means you lost purchasing power. Compare to inflation — a -2% CAGR during 3% inflation means -5% real return. Investments with sustained negative CAGR should be sold unless there's a clear turnaround thesis.

CAGR assumes a single lump sum investment with no cash flows. IRR (Internal Rate of Return) handles multiple contributions and withdrawals. For a 401(k) with monthly contributions, IRR is correct and CAGR is wrong. For a stock bought once and sold once, CAGR and IRR are identical. Use CAGR for simple investments, IRR for accounts with ongoing cash flows. Excel: CAGR = formula, IRR = XIRR function.

CAGR describes past performance, not future guarantees. Mean reversion suggests extreme CAGRs (very high or very low) tend to move toward historical averages. A fund with 25% CAGR over 5 years is unlikely to repeat that — 8-12% is more realistic going forward. Use CAGR to understand what happened, not to predict what will happen. Combine CAGR with valuation metrics (P/E ratios, bond yields) for forward-looking return estimates.

Written and reviewed by the CalcToWork editorial team. Last updated: 2026-04-29.

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Frequently Asked Questions

CAGR is geometric mean; average return is arithmetic mean. Volatility creates a gap between them. Example: +50% one year, -50% next year. Arithmetic average: 0%. But $100 becomes $150 then $75 — you lost 25%. CAGR = (75/100)^(1/2) - 1 = -13.4%. The more volatile the returns, the larger the gap. CAGR reflects actual wealth accumulation; arithmetic average is misleading for volatile investments.
Yes — CAGR is negative when ending value is less than beginning value. A $10,000 investment worth $7,000 after 5 years: CAGR = (7,000/10,000)^(1/5) - 1 = 0.7^0.2 - 1 = 0.931 - 1 = -6.9%. Negative CAGR means you lost purchasing power. Compare to inflation — a -2% CAGR during 3% inflation means -5% real return. Investments with sustained negative CAGR should be sold unless there's a clear turnaround thesis.
CAGR assumes a single lump sum investment with no cash flows. IRR (Internal Rate of Return) handles multiple contributions and withdrawals. For a 401(k) with monthly contributions, IRR is correct and CAGR is wrong. For a stock bought once and sold once, CAGR and IRR are identical. Use CAGR for simple investments, IRR for accounts with ongoing cash flows. Excel: CAGR = formula, IRR = XIRR function.
CAGR describes past performance, not future guarantees. Mean reversion suggests extreme CAGRs (very high or very low) tend to move toward historical averages. A fund with 25% CAGR over 5 years is unlikely to repeat that — 8-12% is more realistic going forward. Use CAGR to understand what happened, not to predict what will happen. Combine CAGR with valuation metrics (P/E ratios, bond yields) for forward-looking return estimates.