CAGR Calculator Guide: Formula, Examples & When to Use It
Compound annual growth rate (CAGR) summarizes multi-year performance into one yearly figure—with clear limits when cash flows, day counts, or arithmetic averages enter the picture.
CAGR Calculator Guide: Formula, Examples & When to Use It
Updated May 2026 · ~8 min read
CAGR is the constant geometric rate connecting positive beginning and ending values across a stated horizon. It smooths the path and does not show volatility, drawdown, liquidity, taxes, fees, or external cash flows. It is not a forecast.
When CAGR is the right lens
- Comparing long horizons: you need one summary growth rate between two balances at known dates.
- Evaluating strategies: you want a single annualized figure comparable across investments with different paths.
- Sanity-checking headlines: you verify whether a quoted “annual” figure matches start/end snapshots.
- No mid-period flows: you can treat the portfolio as buy-and-hold between the two snapshots—otherwise use money-weighted or IRR-style tools.
The formula
CAGR = (ending/beginning)^(1/years) − 1
Material contributions or withdrawals require time-weighted or money-weighted methods rather than endpoint CAGR.
Endpoint growth with path limits
Two assets can share the same CAGR while experiencing very different losses and liquidity needs.
Common mistakes
- Treating CAGR as the return earned each year.
- Ignoring external cash flows.
- Comparing inconsistent horizons.
- Using CAGR alone to rank risk.
Try the calculator
Use the interactive calculator to plug in your numbers and see results instantly—without redoing the math by hand.
Open Stock Return calculator →FAQ
Is CAGR a forecast?
No.
Can CAGR handle deposits?
Not reliably without another return method.
Does CAGR show drawdown?
No.
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Open the Returns & Cost Basis hub →Educational Disclaimer
This article is for educational and informational purposes only and should not be considered investment, financial, tax, or legal advice. Market information may change over time, and readers should verify important details independently before making financial decisions.