CAGR Calculator

Compound Annual Growth Rate (CAGR) is the constant annual rate at which an investment would have grown if it had increased steadily and compounded each year. Real investments rarely grow in a smooth line — they jump around year to year — so CAGR gives you a single, representative number that strips out that volatility and answers a simple question: on average, how fast did this grow per year?

The formula is CAGR = (Ending Value ÷ Beginning Value)^(1 ÷ Years) − 1. Suppose you invested $10,000 and it became $25,000 after 7 years. The total growth is 150%, but the CAGR is (25,000 ÷ 10,000)^(1/7) − 1 ≈ 13.9% per year. That annualized figure is far more useful than the total, because it lets you compare this investment with another that grew over, say, 4 or 10 years.

CAGR is widely used to compare mutual funds, stocks, and business metrics like revenue or user growth. It's more honest than a simple average of yearly returns, which can overstate performance: an investment that drops 50% then rises 50% has an average return of 0% but has actually lost money, and CAGR correctly reflects that loss.

CAGR has limits worth knowing. It assumes a single lump sum left untouched, so it ignores any contributions or withdrawals made along the way — for a portfolio with regular deposits, a money-weighted return is more appropriate. It also hides volatility entirely: two investments can share the same CAGR while one was a smooth ride and the other a roller coaster. And because it depends only on the first and last values, an unusually high or low endpoint can distort the picture. Used with those caveats in mind, CAGR remains one of the clearest, most comparable measures of long-term growth.