CAGR Calculator

Calculate the compound annual growth rate between a beginning and ending value.

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Summary

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Detail

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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.

Real-World Use Cases

Who Uses CAGR Calculator and Why

Summarizing an investment's overall performance over several years into a single, comparable annual growth figure.
Comparing two different investments that had different starting and ending values, or different holding periods, on an equal footing.
Checking a fund's advertised average annual return by working out the actual CAGR from its stated beginning and ending values.
Estimating a business's revenue or user growth rate over multiple years for a pitch deck or planning document.

Common Mistakes

Mistakes to Avoid

Confusing CAGR with the actual year-to-year returns an investment experienced — CAGR is a smoothed figure that ignores volatility along the way, so two investments with very different, bumpier paths can end up with an identical CAGR if they share the same starting and ending values.
Averaging individual yearly percentage returns arithmetically instead of using CAGR — a simple average is misleading because gains and losses don't offset symmetrically (a 50% loss requires a 100% gain just to recover), while CAGR is derived correctly from the actual compounding growth ratio.
Applying CAGR from a short or unusually volatile period as if it reliably predicts future performance — it describes what already happened over that specific stretch, not a guaranteed forward-looking rate.

Pro Tips

Tips for Best Results

When comparing two investments' CAGR, also check the number of years each was calculated over — a high CAGR over a very short period is a different claim than the same CAGR sustained over a decade.
Use CAGR to compare investments with different holding periods on equal footing, since it expresses growth as a single per-year rate regardless of how long each investment was held.

Troubleshooting

Fixing Common Problems

My CAGR doesn't match the return the investment actually seemed to have in a good year. — CAGR smooths the entire holding period into one steady rate — it's not meant to reflect any single year's actual return, only the equivalent constant annual rate that would produce the same overall growth from start to finish.

Glossary

Terms Explained

CAGR (Compound Annual Growth Rate): The steady annual growth rate that would take a beginning value to an ending value over a given number of years, smoothing out actual year-to-year volatility.

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.