Calculate the compound annual growth rate between a beginning and ending value.
How It Works
How CAGR Calculator Works
CAGR smooths an investment's actual up-and-down year-to-year returns into a single steady annual growth rate that would have produced the same overall result — it's the n-th root of the total growth ratio (ending value over beginning value), where n is the number of years.
Worked Example
See It In Action
Growing from $10,000 to $20,000 over 5 years gives a CAGR of about 14.87% — even though the actual year-to-year returns along the way could have been much more volatile than a steady 14.87% each year.
FAQ
Frequently Asked Questions
Does CAGR reflect what actually happened each year?
No — it's a smoothed average that ignores volatility along the way. Two investments with wildly different year-to-year swings can end up with the identical CAGR if they start and finish at the same values.
Why use CAGR instead of a simple average of yearly returns?
A simple average of percentage returns can be misleading because gains and losses don't offset symmetrically (a 50% loss needs a 100% gain to recover) — CAGR is derived from the actual compounding growth ratio, so it reflects the true overall return correctly.
