| Annual growth | Final value ( yr) | Total return |
|---|
One number for the return, another for the ride
CAGR compresses years into a comparable annual rate, but a smooth-looking number can hide a brutal path. Check what it took to survive with the drawdown recovery calculator, and project future compounding on the compound interest calculator.
CAGR smooths volatility into a single honest number
Compound annual growth rate removes the noise of a volatile path and shows what constant rate would produce the same end result. $1,000 → $3,200 in 4 years: CAGR = (3200/1000)^(1/4) − 1 = 33.8%. Whether you got there in a straight line or through a 70% drawdown and recovery, the CAGR is the same.
That's its strength and weakness. CAGR doesn't care about the path. Two portfolios with identical 4-year CAGRs can have totally different risk profiles — one held a stablecoin and one survived a 90% crash. The Sharpe or Sortino ratio captures what CAGR misses.
For crypto, CAGR over 1–2 year periods includes so much bull/bear cycle noise that comparisons across assets are tricky. BTC at 40% 4-year CAGR vs a DeFi token at 60% 4-year CAGR — without knowing the drawdown depths and what percentage of the run you'd realistically have captured, 60 > 40 isn't obvious.
Related: annualized return, ROI calculator, Sharpe ratio.