CAGR Calculator
Calculate the Compound Annual Growth Rate to measure annualized investment performance.
For educational purposes only. This calculator does not provide investment advice.
CAGR
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Total Growth
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Multiplier
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📊 Visual Analysis
What This Calculator Does
The CAGR Calculator computes the Compound Annual Growth Rate of an investment — the constant annual rate at which your money would need to grow to go from the beginning value to the ending value over a set number of years. It smooths out year-to-year volatility into a single, comparable percentage.
Formula
Where n is the number of years. The result is expressed as a percentage. CAGR assumes steady growth — it does not reflect the actual path the investment took.
Input Fields Explained
Beginning Value ($)
The value of your investment at the start of the period. This is your initial principal or the portfolio value at the beginning date.
Ending Value ($)
The value at the end of the period. If you made additional contributions or withdrawals during the period, a simple CAGR may not reflect your true investment return; consider using IRR or a money-weighted return instead.
Number of Years
The length of the holding period in years. For partial years, use a decimal (e.g., 3.5 for 3 years and 6 months).
Example Calculation
You invested $10,000 and after 5 years it grew to $18,000.
CAGR = (18,000 ÷ 10,000)1/5 − 1 = 1.80.2 − 1 = 12.47%
Your investment grew at an annualized rate of 12.47%. If it had grown at exactly this rate each year, the values would be: $11,247 → $12,650 → $14,228 → $16,005 → $18,000.
How to Read the Result
Your investment grew over the period. The higher the CAGR, the faster the growth. You can compare it with a relevant benchmark for the same asset class and time period, but past performance does not predict future results.
Your investment lost value on an annualized basis. A CAGR of −5% means you lost an average of 5% per year.
CAGR is a smoothed rate — it does not mean the investment actually grew by this exact percentage every year. The real path likely had ups and downs.
Common Mistakes
- Treating CAGR as actual yearly returns. CAGR is a smoothed average. The real returns likely varied significantly year to year.
- Ignoring intermediate volatility. Two investments with the same CAGR can have very different risk profiles. One may have been steady; the other may have lost 40% in a single year.
- Using zero or negative beginning values. CAGR requires a positive beginning value. If the beginning value is zero or negative, the formula does not work.
- Excluding contributions or withdrawals. If you added money during the period, CAGR overstates your actual investment return. Use a time-weighted or internal rate of return instead.
- Treating CAGR as actual yearly returns. CAGR is a smoothed average. The real returns likely varied significantly year to year.
- Ignoring intermediate volatility. Two investments with the same CAGR can have very different risk profiles. One may have been steady; the other may have lost 40% in a single year.
- Using zero or negative beginning values. CAGR requires a positive beginning value. If the beginning value is zero or negative, the formula does not work.
- Excluding contributions or withdrawals. If you added money during the period, CAGR overstates your actual investment return. Use a time-weighted or internal rate of return instead.
- Comparing CAGR across different time lengths. A 30% CAGR over 2 years is not directly comparable to 12% over 10 years without considering risk, volatility, and the starting/ending dates used.
- Comparing the historical performance of two investments over the same period
- Evaluating whether an investment beat a benchmark on an annualized basis
- Projecting future values assuming a constant growth rate
- Communicating long-term returns in a single, comparable number
- CAGR does not reflect volatility, drawdowns, or the sequence of returns
- It ignores cash flows — contributions and withdrawals during the period are not accounted for
- CAGR is backward-looking and does not predict future performance
- Short-period CAGR (1-2 years) can be misleading due to noise
- Comparing the historical performance of two investments over the same period
- Evaluating whether an investment beat a benchmark on an annualized basis
- Projecting future values assuming a constant growth rate
- Communicating long-term returns in a single, comparable number
What This Calculator Does
The CAGR Calculator computes the Compound Annual Growth Rate of an investment — the constant annual rate at which your money would need to grow to go from the beginning value to the ending value over a set number of years. It smooths out year-to-year volatility into a single, comparable percentage.
Formula
Where n is the number of years. The result is expressed as a percentage. CAGR assumes steady growth — it does not reflect the actual path the investment took.
Input Fields Explained
Beginning Value ($)
The value of your investment at the start of the period. This is your initial principal or the portfolio value at the beginning date.
Ending Value ($)
The value at the end of the period. If you made additional contributions or withdrawals during the period, a simple CAGR may not reflect your true investment return; consider using IRR or a money-weighted return instead.
Number of Years
The length of the holding period in years. For partial years, use a decimal (e.g., 3.5 for 3 years and 6 months).
Example Calculation
You invested $10,000 and after 5 years it grew to $18,000.
CAGR = (18,000 ÷ 10,000)1/5 − 1 = 1.80.2 − 1 = 12.47%
Your investment grew at an annualized rate of 12.47%. If it had grown at exactly this rate each year, the values would be: $11,247 → $12,650 → $14,228 → $16,005 → $18,000.
How to Read the Result
Your investment grew over the period. The higher the CAGR, the faster the growth. You can compare it with a relevant benchmark for the same asset class and time period, but past performance does not predict future results.
Your investment lost value on an annualized basis. A CAGR of −5% means you lost an average of 5% per year.
CAGR is a smoothed rate — it does not mean the investment actually grew by this exact percentage every year. The real path likely had ups and downs.
Common Mistakes
When This Calculator Is Useful
Limitations
Limitations
- CAGR does not reflect volatility, drawdowns, or the sequence of returns
- It ignores cash flows — contributions and withdrawals during the period are not accounted for
- CAGR is backward-looking and does not predict future performance
- Short-period CAGR (1-2 years) can be misleading due to noise
Frequently Asked Questions
What is CAGR?
CAGR (Compound Annual Growth Rate) is the annualized rate of return that an investment would need to grow from its beginning value to its ending value over a given period. It assumes the growth was steady each year, which smooths out volatility.
How is CAGR different from average return?
CAGR accounts for compounding, while a simple average return does not. For example, if an investment grows 50% one year and drops 50% the next, the average return is 0% but CAGR is -13.4%. CAGR gives a more accurate picture of what you actually earned annually.
Can CAGR be negative?
Yes. If the ending value is less than the beginning value, CAGR will be negative, meaning the investment lost value on an annualized basis.
What is a good CAGR for stocks?
There is no single "good" CAGR for every investment. A useful CAGR depends on the asset class, time period, inflation, fees, taxes, and risk level. You can compare CAGR with a relevant benchmark, but past returns do not predict future performance.
What is the difference between CAGR and absolute return?
Absolute return measures the total percentage change from start to end, regardless of time. CAGR converts that into an annualized rate, showing the equivalent constant yearly growth. For example, a 50% absolute return over 5 years equals about 8.45% CAGR. CAGR is better for comparing investments held over different periods, while absolute return is simpler for a single holding period.
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Educational Disclaimer
This calculator is for educational and informational purposes only. It does not provide investment, financial, tax, or legal advice. The results are based on the inputs and assumptions you provide and may not reflect real market conditions, fees, taxes, or risks. Always do your own research or consult a qualified professional before making financial decisions.