CAGR Calculator

Use this CAGR calculator to measure how fast your investment grew on average each year. CAGR stands for Compound Annual Growth Rate

CAGR Calculator

Calculate your Compound Annual Growth Rate

Starting Balance $10,000
$
Ending Balance $25,000
$
Duration (Years) 5 years

CAGR

0.00%

Total Absolute Gain
$0
Final Balance
$0

Growth Trajectory

Yearly Breakdown

Year Start Balance Interest (Est.) End Balance

People Also Ask About CAGR

What is CAGR?
CAGR stands for Compound Annual Growth Rate. It is a useful measure of growth over multiple time periods. It represents one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time. Unlike average growth rate, CAGR accounts for the effect of compounding.
How is CAGR different from average annual return?
Average annual return is a simple arithmetic mean of yearly returns and does not account for compounding. It can be misleading if there is high volatility in the returns. CAGR, on the other hand, smooths out the volatility and provides the constant rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each year.
What is the formula for CAGR?
The formula for CAGR is:
CAGR = (EV / BV)^(1/n) - 1
Where:
EV = Ending Value
BV = Beginning Value
n = Number of years
Can CAGR be negative?
Yes, CAGR can be negative. This occurs when the ending value of an investment is less than the beginning value. A negative CAGR indicates a loss in value over the time period measured.
Why is CAGR useful for investors?
Investors use CAGR to compare the performance of different investments or businesses over time. Because it smooths out volatility, it allows for a direct comparison between two distinct assets, even if one had wild swings and the other was steady, as long as the start and end points and the duration are the same.

What Is a CAGR Calculator

A CAGR calculator measures how fast your investment grew on average each year. CAGR stands for Compound Annual Growth Rate. It smooths out all the ups and downs to show one steady percentage that represents your overall performance. This helps you compare different investments fairly, even when they had wildly different journeys to reach their final values.

Input Fields Explained in the CAGR Calculator

Starting Balance

Enter what you had at the beginning. Maybe you invested $10,000 in stocks five years ago or put $50,000 into a business. This is your initial amount before any growth or losses occurred.

Ending Balance

Put in what you have now or at the end of your measurement period. If that $10,000 investment is worth $18,000 today, enter $18,000. If your business equity grew to $85,000, use that number. This is your final value.

Duration

How many years passed between your start and end points? This could be 3 years, 10 years, or any timeframe. The calculator needs this to figure out the annual rate. Longer periods smooth out short-term volatility better.

Reading Your Results in the CAGR Calculator

CAGR Percentage

This is your average annual growth rate. A CAGR of 12.5% means your investment grew by that percentage each year on average. Negative numbers mean you lost money. This single percentage tells you exactly how your investment performed per year.

Total Absolute Gain

This shows your raw profit or loss in dollars. If you started with $20,000 and ended with $35,000, your absolute gain is $15,000. Green means profit, red means loss. This number doesn't account for time, just total change.

Final Balance Display

This confirms your ending amount. It helps when you're running multiple scenarios and want to verify which numbers you're currently viewing.

Growth Trajectory Chart

The line shows how your investment would have grown if it increased at your CAGR every single year. Real investments rarely follow this smooth path—they zigzag up and down. But over time, the actual ending value matches what steady growth at your CAGR would produce.

Yearly Breakdown Table

This table imagines your investment growing at the CAGR rate each year. Year 1 shows your starting amount plus one year of CAGR growth. Year 2 builds on that, and so on. Real yearly results probably looked different, but the final number matches your actual outcome.

The CAGR Calculator Formula

The calculator uses this formula: CAGR = (Ending Value ÷ Starting Value)^(1 ÷ Years) - 1

Breaking it down:

  • Divide your ending balance by starting balance
  • Raise that result to the power of (1 divided by number of years)
  • Subtract 1 from the result
  • Multiply by 100 to get a percentage

Example: $10,000 grew to $25,000 in 5 years

  • $25,000 ÷ $10,000 = 2.5
  • 2.5^(1÷5) = 2.5^0.2 = 1.2011
  • 1.2011 - 1 = 0.2011
  • 0.2011 × 100 = 20.11% CAGR

Why CAGR Critical

CAGR lets you compare investments with different timeframes and volatility. You can't easily compare a stock that grew 45% over 3 years to one that grew 80% over 7 years. But converting both to CAGR shows which performed better annually.

It also reveals the truth behind misleading claims. A company might brag about 100% total growth, but if that took 10 years, their CAGR is only 7.2%—nothing special. CAGR cuts through marketing hype with honest numbers.

Investors use CAGR to set realistic expectations. If the stock market historically returns around 10% CAGR, you know a fund promising 15% CAGR is either exceptional or risky. Extremely high CAGRs rarely sustain long-term.

Common Uses

Portfolio performance reviews benefit from CAGR. Instead of looking at each year's wild swings, calculate your overall CAGR from when you started investing. This shows if your strategy actually works over time.

Real estate investors compare property performance using CAGR. A house bought for $200,000 and sold for $350,000 after 8 years has a CAGR of about 6.6%. Compare that to other investment options to see if real estate beat alternatives.

Business owners track company growth with CAGR. Revenue growing from $1 million to $2.5 million over 5 years represents a 20% CAGR. This helps when pitching to investors or planning future expansion.

Getting Better Results

Extend your measurement period when possible. A 1-year CAGR is basically just your annual return. A 10-year CAGR gives much more meaningful insight into long-term performance because it averages out market cycles.

Include all contributions and withdrawals in your calculations. If you added $5,000 halfway through, that affects your true CAGR. Many online calculators handle this poorly, so be aware of what numbers you're inputting.

Compare your CAGR against relevant benchmarks. A 6% CAGR sounds okay until you realize the S&P 500 returned 9% CAGR during the same period. Context shows whether you're winning or falling behind.

Limitations to Know

CAGR assumes reinvested profits. If you withdrew dividends or interest instead of reinvesting them, your actual CAGR calculation needs adjustment. The formula assumes everything stayed in the investment.

Taxes and fees aren't included. Your gross CAGR might be 10%, but after taxes and management fees, your net CAGR could be only 7%. Always consider costs when evaluating performance.

Starting and ending points dramatically affect results. Measuring from a market peak to valley gives terrible CAGR. Measuring valley to peak shows amazing CAGR. Cherry-picking dates manipulates results, so use consistent, meaningful timeframes.

Conclusion

CAGR turns complicated investment histories into one simple number you can actually use. It shows average annual performance regardless of how bumpy the ride was. Use it to evaluate past investments, compare different options, and set realistic future expectations.