CAGR Calculator — Compound Annual Growth Rate
Calculate the Compound Annual Growth Rate (CAGR) of an investment. Enter the beginning and ending values along with the number of years to find the smoothed annual growth rate. See also ROI Calculator and Investment Calculator.
How to Calculate CAGR
CAGR (Compound Annual Growth Rate) represents the smoothed annual rate of return that an investment would have earned if it had grown at a steady rate. Unlike simple average returns, CAGR accounts for compounding and gives a single growth rate that takes you from the beginning value to the ending value over the specified period. It is widely used to compare the performance of investments, business revenue growth, and economic indicators over time.
CAGR Formula
CAGR = (Ending Value / Beginning Value)^(1/n) − 1
Where:
Ending Value = final value of the investment
Beginning Value = initial value of the investment
n = number of years
Total Return:
Total Return = ((Ending − Beginning) / Beginning) × 100
Example Calculation
Beginning Value: $10,000
Ending Value: $25,000
Number of Years: 5
CAGR = (25,000 / 10,000)^(1/5) − 1
CAGR = (2.5)^(0.2) − 1
CAGR = 1.2011 − 1
CAGR = 20.11% per year
Total Return: 150% | Absolute Gain: $15,000
CAGR Reference Table
| Beginning | Ending | Years | CAGR | Total Return |
|---|---|---|---|---|
| $10,000 | $15,000 | 5 | 8.45% | 50% |
| $10,000 | $20,000 | 5 | 14.87% | 100% |
| $10,000 | $25,000 | 5 | 20.11% | 150% |
| $10,000 | $20,000 | 10 | 7.18% | 100% |
| $10,000 | $50,000 | 10 | 17.46% | 400% |
| $10,000 | $100,000 | 20 | 12.20% | 900% |
| $50,000 | $30,000 | 3 | -15.63% | -40% |
Frequently Asked Questions
What is the difference between CAGR and average annual return?
Average annual return is the arithmetic mean of yearly returns, while CAGR is the geometric mean. CAGR accounts for compounding and gives the actual rate needed to grow from the beginning to ending value. Average return can be misleading — an investment that gains 100% then loses 50% has a 25% average return but 0% CAGR (you end where you started).
Can CAGR be negative?
Yes. If the ending value is less than the beginning value, the CAGR will be negative, indicating the investment lost value over the period.
What is a good CAGR for investments?
The S&P 500 has historically delivered about 10% CAGR (7% after inflation). A CAGR above 15% is considered excellent for most investments. However, higher CAGR often comes with higher risk and volatility.
Does CAGR account for volatility?
No. CAGR smooths out all volatility and shows only the beginning-to-end growth rate. Two investments can have the same CAGR but very different risk profiles. Always consider volatility and maximum drawdown alongside CAGR.