CAGR Calculator
Compound annual growth rate between a start and end value.
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Compound annual growth rate smooths a multi-year investment into a single steady yearly rate — the rate that would have grown your starting value into the ending value if it compounded evenly each year.
How it works
CAGR = (end ÷ start)^(1 ÷ years) − 1. It is the steady yearly rate that turns the start value into the end value.
Real returns are lumpy: a good year, a bad year, a flat year. CAGR strips out that volatility and tells you the equivalent constant rate, which is what makes it the standard way to compare investments held over different periods.
Because it's a geometric average, CAGR is always less than or equal to the simple average of the yearly returns — volatility drags compounded growth below what the arithmetic average suggests. That's why CAGR, not the average annual return, is the honest growth figure.
CAGR = (ending value ÷ starting value)^(1 ÷ years) − 1, expressed as a percent
Worked examples
$10,000 grows to $25,000 over 7 years → ≈ +13.99% per year
(25,000 ÷ 10,000)^(1/7) − 1 ≈ 0.1399, so a steady ~13.99% annually would turn $10,000 into $25,000 in seven years.
$10,000 grows to $20,000 over 10 years → ≈ +7.18% per year
Doubling over a decade is roughly 7.18% compounded annually — close to what the Rule of 72 predicts.
Tips & gotchas
- Use CAGR, not the simple average of yearly returns, when judging an investment — the simple average overstates real growth whenever returns vary.
- CAGR hides volatility: two investments with the same CAGR can have wildly different year-to-year swings and risk profiles.
- It assumes no deposits or withdrawals between start and end — for accounts with cash flows in and out, CAGR on the raw balances will be misleading.
- Pair CAGR with a measure of volatility before deciding; a high CAGR earned through stomach-churning drops may not suit your risk tolerance.
FAQ
Why is CAGR lower than the average yearly return?
Compounding penalizes volatility. A +50% year followed by a −50% year averages 0% but actually leaves you down 25% — CAGR captures that real result, the arithmetic average does not.
Can CAGR be negative?
Yes. If the ending value is below the starting value, CAGR is negative, representing the steady annual rate of loss.
Does CAGR account for deposits I made along the way?
No. It only uses the start value, end value, and time. If you added or withdrew money, use a money-weighted return measure instead for an accurate picture.
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