Free CAGR Calculator for New Zealanders
Compound annual growth rate (CAGR) is the smoothed annual return that takes a starting value to an ending value over a set number of years. The standard way to compare investment returns on different timeframes.
Your investment
From $10,000 to $25,000 over 5 years.
About our CAGR Calculator
$50,000 grown to $98,000 over 10 years is a 6.96% CAGR. The actual yearly returns might have been -5%, +12%, +8%, etc., but the CAGR captures the smoothed equivalent.
How to use it
Enter starting value, ending value, and the period in years. The calculator returns the CAGR.
Why use it
For comparing investments with different time horizons on a like-for-like basis. Most NZ KiwiSaver and managed-fund returns are reported as 5-year or 10-year CAGRs.
The maths behind it
CAGR = (Ending value ÷ Starting value)1/n − 1 CAGR smooths the actual year-to-year ups and downs into a single annual rate that would have produced the same end-to-start ratio. Useful for comparing investments with different time horizons or fund returns over different periods.
Worked example
A KiwiSaver balance growing from $50,000 to $98,000 over 10 years.
Starting value $50,000, ending $98,000, period 10 years.
CAGR = ($98,000 ÷ $50,000)1/10 − 1 = 1.960.1 − 1 = 6.96%.
The fund effectively earned 6.96% a year on average. The actual annual returns might have been -5%, +12%, +8%, etc.; CAGR is the constant rate that would produce the same finishing balance.
Things to keep in mind
- CAGR hides volatility. A fund returning -10%, then +25%, then +5% has very different volatility from one returning 6% every year. CAGR for both can be similar, but the experience is different.
- Net of fees and tax. Reported KiwiSaver and managed-fund CAGRs are typically after fees and PIE tax. For comparisons against pre-tax figures, adjust accordingly.
- Sample period matters. CAGR over 5 years can look very different from 10 or 20 years. Always note the period when comparing.
NZ-specific notes
FAQs
Why use CAGR rather than a simple average?
Simple averages overstate the realised return when returns vary. CAGR captures actual end-to-start growth, which is the figure that matters for investors.
Does CAGR account for cash flows?
No. For investments with regular contributions or withdrawals, money-weighted return (XIRR / IRR) is more accurate. CAGR works for lump-sum investments compared end-to-end.
Is CAGR the same as average annual return?
No. The arithmetic average of yearly returns is usually higher than CAGR (because of volatility drag). Use CAGR for end-balance comparisons.
References & sources
- Financial Markets Authority, "KiwiSaver annual report". fma.govt.nz
- NZX, "Market data". nzx.com
- Te Ara Ahunga Ora Retirement Commission, "Sorted investing guides". sorted.org.nz