Deutsche Fassung
Measuring return properly

Annualised return (CAGR)

Annualised return converts a total return into an average year, geometrically rather than as a simple average. A 21 % gain over three years becomes roughly 6.6 % per year. Only this makes periods of different length fairly comparable.

Where does your annual return sit?6.6% p.a.
Negative
Normal over short periods, especially when the window holds a correction. Over ten years and more it has historically been the exception in broad equity markets.
Below market
Roughly what defensive blends or bonds have delivered long term. Little survives inflation.
Market-typical
The historical range of broad equity markets over long periods, roughly 6 to 8 % per year before tax and inflation.
Above market
Check the length of the history first. Over a few years such a figure says more about the market phase than about selection.

How it is calculated

CAGR = ( end value / start value )^(1 / years) − 1

A portfolio grows from 10,000 € to 12,100 € over three years, a gain of 21 %. The simple average would be 7.0 % per year. That is too high, because it ignores compounding.

Start value
10,000 €
End value
12,100 €
Total
+21.0 %
CAGR
6.6 % p.a.

What the number does not tell you

  • It smooths the path away entirely. The same 6.6 % per year comes out of a calm ride and out of a 40 % crash followed by recovery. How bumpy it was shows in volatility and maximum drawdown.
  • Annualising short periods is dishonest. Four months at 8 % arithmetically become 26 % per year. That number describes nothing repeatable. Below a year of history, annualised return is an arithmetic operation, not a statement.
  • It is before tax and inflation. At 6.6 % nominal with 2 % inflation and capital gains tax, considerably less remains in real terms. For purchasing power questions you have to deduct both yourself.
  • It says nothing about your contributions. Annualised return is time-weighted and therefore independent of when you added money. What your money actually earned is answered by the money-weighted return.

Related metrics

Time-weighted returnThe quality of the investment, independent of contribution timing.VolatilityHow widely the portfolio value swings, in percent per year.Sharpe ratioReturn per unit of volatility, after deducting the risk-free rate.Monte Carlo simulationThousands of possible paths instead of a single number.

How Evergrova calculates it

Annualised return sits in the metric band on Performance & Risk, next to the cumulative return of the selected window. Where history is short, the asset view labels the figure explicitly as an extrapolation.

Data basis: daily returns over the selected window, annualised geometrically to 252 trading days.

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Common questions

What is the difference between CAGR and average return?

The simple average adds the annual returns and divides by their count. CAGR accounts for compounding and therefore always sits lower once returns vary. With +50 % and −50 %, the average is 0 % but the CAGR is −13.4 % per year.

What return is realistic long term?

Broad equity markets have historically delivered roughly 6 to 8 % per year before tax and inflation. That is a look back over very long periods, not an assurance for the years ahead.

Why does my return differ from my broker figure?

Usually the method. Many brokers show a money-weighted return that folds in deposits and withdrawals. Evergrova additionally shows the time-weighted figure, which measures the path independently of when you paid in.

Last reviewed: 2026-08-08

This text is general information. It is neither investment advice nor a recommendation. Metrics describe past periods and allow no conclusion about future performance.