CAGR Calculator
The Compound Annual Growth Rate (CAGR) shows the smoothed annual return of an investment over a period of years. Enter your starting value, ending value, and the number of years to see your annualized growth rate.
How it works
CAGR measures the mean annual growth rate of an investment over a specified period longer than one year, assuming the gains are reinvested each year.
The formula is: CAGR = (Ending Value / Beginning Value)^(1 / Years) − 1. For example, growing $10,000 to $18,000 over 5 years gives (18000/10000)^(1/5) − 1 ≈ 12.47% per year.
Unlike a simple average return, CAGR smooths out volatility and reflects the constant rate that would produce the same final result if compounded annually.
Tips
CAGR ignores interim volatility, so two investments with the same CAGR can have very different risk levels and year-to-year swings.
Use CAGR to compare investments held for the same number of years; for different time horizons it remains the best apples-to-apples annualized measure.
CAGR does not account for additional contributions or withdrawals — for those, consider an internal rate of return (IRR) calculation instead.
FAQ
What is a good CAGR?
It depends on the asset class and risk. Historically, broad stock market indices have returned roughly 7–10% CAGR over long periods, but individual results vary widely.
How is CAGR different from average annual return?
A simple average adds yearly returns and divides by the number of years, which can overstate results. CAGR accounts for compounding and gives the true annualized growth rate.
Can CAGR be negative?
Yes. If the ending value is lower than the beginning value, the CAGR will be negative, indicating an annualized loss over the period.