CAGR Calculator
Calculate the compound annual growth rate of any investment. Enter the beginning value, ending value, and time period to see your CAGR, total return, doubling time, and future projections.
How CAGR Works
Compound Annual Growth Rate (CAGR) is the smoothed annual rate of return that an investment would have earned if it grew at a steady rate over a given time period. Unlike simple average returns, CAGR accounts for the compounding effect, giving you a single annualized number that represents the true growth trajectory. CAGR is widely used by investors, financial analysts, and business planners to compare the performance of different investments, evaluate business revenue growth, and set realistic financial targets. It eliminates the noise of year-to-year volatility and shows what the investment effectively earned each year on a compounded basis.
CAGR Formula
CAGR = (Ending Value / Beginning Value)^(1/n) − 1
Where: Ending Value = final investment value, Beginning Value = initial investment value, n = number of years. Multiply the result by 100 to express as a percentage.
For example, if you invested $10,000 and it grew to $25,000 over 5 years, the CAGR is (25000/10000)^(1/5) - 1 = 20.11%. This means your investment grew at an effective rate of 20.11% per year, compounded annually, even though the actual year-by-year returns may have varied significantly.
CAGR vs Average Annual Return
Many investors confuse CAGR with the simple average of annual returns. Consider an investment that gains 50% in year one and loses 30% in year two. The simple average return is (50% + (-30%)) / 2 = 10%. But starting with $10,000, you would have $15,000 after year one and $10,500 after year two. The actual CAGR is only 2.47%. This difference matters because CAGR reflects the geometric mean of returns, accounting for the compounding effect, while the arithmetic average overstates actual performance. Always use CAGR when evaluating real-world investment performance over multiple years.
Real-World Example
The S&P 500 index grew from approximately 1,000 in 2009 to 4,800 in 2024, a 15-year period. The CAGR is (4800/1000)^(1/15) - 1 = 10.9% per year. Despite individual years ranging from -4% to +30%, the smoothed CAGR tells you the effective annual compound rate you earned by staying invested the entire period.
When to Use CAGR
CAGR is ideal for comparing investments with different time horizons, evaluating business revenue or profit growth over multiple years, benchmarking portfolio performance against market indices, and projecting future values based on historical growth rates. Use it whenever you need a single, reliable number that summarizes growth performance. However, CAGR has limitations: it does not show volatility or risk, it assumes smooth growth when reality is lumpy, and it cannot account for additional deposits or withdrawals during the investment period. For investments with regular contributions, consider using the internal rate of return (IRR) instead.
Tips for Using CAGR Effectively
Compare like with like by using the same time period for different investments. Use CAGR alongside volatility measures like standard deviation to understand risk-adjusted returns. When projecting future growth, be conservative: historical CAGR rarely repeats exactly. Combine CAGR analysis with the Rule of 72 to quickly estimate doubling times. A CAGR of 7.2% means your money doubles roughly every 10 years, while a CAGR of 12% doubles your investment in about 6 years. Remember that even small differences in CAGR compound into large differences over long periods.
Frequently Asked Questions
What is CAGR?
CAGR stands for Compound Annual Growth Rate. It is the smoothed annual rate of return an investment would have earned if it grew at a steady rate over a specific time period, accounting for compounding.
How is CAGR different from average return?
CAGR uses the geometric mean of returns, which accounts for compounding. Average return uses the arithmetic mean, which can overstate actual performance. CAGR tells you what you actually earned; average return tells you the typical year.
What is a good CAGR for investments?
The S&P 500 has historically delivered a CAGR of about 10% per year over long periods. A CAGR above 15% is considered excellent, 10-15% is strong, and 7-10% is solid for diversified portfolios.
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 the Rule of 72?
The Rule of 72 is a quick way to estimate how long it takes to double your money. Divide 72 by the annual growth rate. For example, at 8% CAGR, your money doubles in approximately 9 years.
Is CAGR Calculator free to use?
Yes, CAGR Calculator is completely free with no sign-up, no login, and no hidden fees. The tool runs entirely in your browser and your data never leaves your device.
Is my financial data safe?
Yes. This tool runs 100% in your browser using JavaScript. No data is sent to any server, stored in any database, or shared with any third party. When you close the page, processing stops immediately.