CAGR Calculator
CAGR answers a deceptively simple question: if something grew from this value to that value over N years, what steady yearly rate would explain it? It smooths a jagged real-world path into one comparable number — the standard growth yardstick for investments, businesses, and markets.
Educational estimate only — not financial advice. Results depend entirely on the numbers and assumptions you enter; real-world returns, rates, taxes, and fees will differ.
What is CAGR (compound annual growth rate)?
CAGR — compound annual growth rate — is the constant yearly rate that would carry a beginning value to an ending value over a given number of years, with growth compounding annually. If an investment grows from $10,000 to $18,500 in five years, it did not necessarily grow 13% in any particular year; but a steady 13.09% every year would have produced exactly that result. CAGR is that steady-equivalent rate, and it is the standard way analysts, funds, and companies summarize multi-year growth in a single figure.
Its power is comparability. Total return alone misleads across different horizons — 85% over five years and 85% over ten years are entirely different achievements (CAGRs of about 13.1% and 6.3%). Raw yearly averages mislead too: an investment that rises 50% one year and falls 30% the next has an 'average' return of 10% a year but has actually grown only 5% over the two years, a CAGR of about 2.5%. CAGR always lands on the truth of the endpoints, because it is built from them by construction.
The same smoothing is CAGR's limitation: it says nothing about the path. Two investments with identical CAGRs may have traveled very differently — one steadily, one with a terrifying plunge in the middle. Risk, volatility, and the sequence of returns are invisible to CAGR, which is why professionals pair it with measures of variability and maximum drawdown. Used for what it is — a growth summary and comparison tool — it is indispensable; used as a promise about the future, it misleads.
Market indexes are usually described in CAGR terms. When you read that an index returned about 10% a year over some long span, that figure is a CAGR computed from index levels — and usually a price-only one, unless dividends are stated to be included. Reinvested dividends typically add a couple of points a year, which is why total-return CAGRs exceed price CAGRs, and why the distinction matters when you compare a fund's reported performance against a headline index figure.
How CAGR (compound annual growth rate) is calculated
The formula divides the ending value by the beginning value, takes the Nth root of the result (where N is the number of years), and subtracts 1. The Nth root converts the total growth factor into an annual growth factor: total growth of 1.85× over five years becomes an annual factor of about 1.1309, i.e., 13.09% a year. Partial years work the same way — a 30-month period is 2.5 years, and the exponent is 1/2.5.
The calculator also reports total return (the simple percentage gain across the whole period) and the doubling time implied by the CAGR: how long money growing at that rate takes to double, computed exactly as ln(2) ÷ ln(1 + CAGR). The familiar Rule of 72 (72 ÷ rate) is an approximation of the same figure and lands close for rates in the usual range.
Verify the mechanics by reversing them: grow the beginning value at the CAGR for the stated years and you must land exactly on the ending value — $10,000 × 1.1309^5 ≈ $18,500. CAGR is the only constant annual rate with that property; the arithmetic average of yearly returns almost never reproduces the endpoints, which is the quickest test of whether a quoted 'average return' was computed honestly.
When you compute CAGR for an investment with money added or withdrawn along the way, the result will be wrong as a measure of the investment's performance, because the ending value mixes market growth with your deposits. Funds solve this with time-weighted returns; households should compute CAGR on accounts they left alone, or on the market index itself, and treat contribution-fed accounts with the investment calculator's projection approach instead.
Worked example
An investment of $10,000 grows to $18,500 over 5 years, with nothing added or withdrawn. The calculator is pre-loaded with these values.
| Beginning value | $10,000.00 |
| Ending value | $18,500.00 |
| Total gain | $8,500.00 |
| Total return | 85.00% |
| CAGR | 13.09% per year |
| Doubling time at this CAGR | 5.63 years |
A total return of 85% sounds like '17% a year' if you simply divide by five — but that arithmetic average overstates the truth. The CAGR is 13.09%: grow $10,000 at exactly that rate for five years and you get precisely $18,500, no more and no less. The gap between 17% and 13.09% is the compounding correction, and it widens with bigger returns and longer periods — the exact situations where people most want an honest number.
At a 13.09% CAGR, money doubles every 5.63 years. Doubling time is a useful gut-check for any growth claim: a pitch promising to double money in three years is claiming a CAGR of about 26%, sustained — a claim that should trigger immediate skepticism and questions about risk.
CAGR for businesses and revenue
Companies report revenue and earnings CAGR the same way investors do, and analysts use it to compare growth across firms of different sizes and across periods of different lengths. A startup growing revenue from $200,000 to $1.6 million in three years has a 100% CAGR; a mature firm growing from $2 billion to $2.9 billion over five years has about a 7.7% CAGR. The second firm added far more dollars; the first grew far faster in percentage terms. Both facts matter, and CAGR captures only one of them — always pair it with the absolute values, which is why this page shows the gain alongside the rate.
Endpoint sensitivity is the business version of the same caveat: choosing an unusually weak start year or a boom end year flatters the figure. When a CAGR claim matters, recompute it over adjacent windows — the calculator makes that a ten-second check — and see whether the story survives.
CAGR vs. average annual return
If returns are +50% and −30% in successive years, the arithmetic average is +10% — and the investment is up only 5% in total (1.50 × 0.70 = 1.05), a CAGR of about 2.47%. Losses hurt more than equal gains help, because a loss shrinks the base the next gain applies to. CAGR bakes this asymmetry in automatically; arithmetic averages ignore it entirely, which is why regulators require fund performance to be presented in CAGR-like (annualized total return) form.
Volatility widens the gap between the two measures: the more the path swings, the more the arithmetic average overstates what a buy-and-hold investor earned. This 'volatility drag' is a real cost of choppy investments and one reason two portfolios with the same average yearly return can end with very different balances.
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Frequently asked questions
What does CAGR tell me that total return does not?
It puts growth on a per-year basis that accounts for compounding, so results over different time spans and from different starting points can be compared directly. Total return over five years and over ten years are not comparable until both are annualized — that annualization is CAGR.
Can CAGR be negative?
Yes. If the ending value is below the beginning value, the Nth root produces a factor below 1 and the CAGR is negative — for example, $10,000 falling to $8,000 over four years is a CAGR of about −5.43% a year.
Why is CAGR lower than the average of the yearly returns?
Because compounding punishes variance. A gain of 50% followed by a loss of 30% compounds to +5% total, not +20%. The arithmetic average (+10%) ignores the fact that the loss applied to a larger base than the gain did. CAGR is the rate consistent with what actually happened to the money.
Is a high past CAGR a good predictor of future returns?
No. CAGR summarizes a specific past window; it does not forecast. Past CAGRs are heavily influenced by the chosen start and end dates and by market conditions that may not repeat. Use it to describe and compare history, not as an expected return — for planning, use a deliberately conservative assumption.
How do I calculate CAGR for part of a year?
Express the period in years as a decimal — months divided by 12, or days divided by 365 — and use that as n. Growth from $10,000 to $11,000 in 18 months is n = 1.5, giving a CAGR of about 6.56%.