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CAGR Calculator

Find the steady annual growth rate that takes an investment from its beginning value to its ending value over a given time period. CAGR smooths out volatility to show the average annual return.

Compound Annual Growth Rate (CAGR) is the single most useful number for comparing investments over time. It answers: "If this investment had grown at exactly the same rate every year, what would that rate be?" It smooths out the messy reality of actual year-by-year returns — up 30%, down 15%, up 8%, flat, up 22% — into a single comparable annualized number.

Why this matters: a portfolio that goes from $10,000 to $25,000 over 5 years has a 150% total return. That sounds impressive, but the equivalent steady annual rate is 20.1% per year. Quoting "150% total return" is technically correct but misleading for comparing to other periods or assets. CAGR gives you the apples-to-apples view: 20.1% per year is what you'd need from a savings account to match the same outcome.

CAGR is different from a simple average return, and the difference can be substantial. A portfolio that returns +50% in year 1 and −50% in year 2 has an arithmetic average of 0%, but its actual ending value is 75% of the starting value — for a CAGR of about −13% per year. The arithmetic average overstates the real growth because it doesn't account for the compounding effect of losses on a now-smaller base. CAGR is always less than or equal to the arithmetic average, and the gap widens with volatility.

This calculator takes a beginning value, ending value, and time period and returns the CAGR — the steady annual rate that connects the two. It works for any investment with a clear start and end value: a stock, a portfolio, a real estate purchase, a business.

Inputs

$
$

Results

CAGR

20.11%

Total Return

$15,000

Total Return %

150.0%

Growth at CAGR

Growth Breakdown

Last updated: Reviewed by the CalcMountain editorial team

Formula

Compound Annual Growth Rate: CAGR = (Ending Value / Beginning Value)^(1/n) − 1 Expressed as a percentage: × 100. Where: Beginning Value = Value at the start of the period Ending Value = Value at the end of the period n = Number of years (can be fractional for partial years) Inverse — projecting forward: Ending Value = Beginning Value × (1 + CAGR)^n Comparison with arithmetic average: For a series of annual returns r₁, r₂, ..., rₙ: Arithmetic average = (r₁ + r₂ + ... + rₙ) / n CAGR = [ (1 + r₁) × (1 + r₂) × ... × (1 + rₙ) ]^(1/n) − 1 CAGR ≤ Arithmetic average always, with equality only when all annual returns are identical. The gap (called "variance drag") grows with volatility. Example: $10,000 → $25,000 over 5 years. CAGR = (25,000 / 10,000)^(1/5) − 1 = 2.5^0.2 − 1 = 1.2011 − 1 ≈ 20.1% per year To project forward at the same CAGR for 10 more years: Future value = 25,000 × (1.2011)^10 ≈ $155,200 Variance-drag example: +50% then −50% (two years) Arithmetic average: 0% Geometric (CAGR): (1.5 × 0.5)^(1/2) − 1 = 0.866 − 1 = −13.4% Actual: starts at 100, becomes 150, ends at 75. CAGR is right; arithmetic average is misleading.

How to use this calculator

  1. Enter the beginning value of the investment — what it was worth at the start of the period.
  2. Enter the ending value — what it's worth now (or at the end of the period you're analyzing).
  3. Enter the number of years between the two values. Use fractional years for partial periods (e.g., 2.5 for 2 years 6 months).
  4. Read the CAGR as the equivalent steady annual rate. If you compare it to a savings account APY, a bond yield, or a stock index's historical return, this is the directly comparable number.
  5. For comparing multiple investments, calculate the CAGR of each over identical time periods. CAGRs from different periods are not directly comparable — a 30% one-year return is not better than a 10% ten-year CAGR.
  6. For projections, multiply the current value by (1 + CAGR)^(future years). But remember: past CAGR doesn't predict future returns, especially for short historical periods.
  7. For an investment with regular contributions, CAGR understates the actual experience. Use the IRR (internal rate of return) calculator instead when there are inflows or outflows during the period.

Worked examples

S&P 500 long-term historical CAGR

Hypothetical $10,000 invested in an S&P 500 index fund in 2003. Worth approximately $63,000 by end of 2023 (with dividends reinvested). CAGR = (63,000 / 10,000)^(1/20) − 1 = 6.3^0.05 − 1 ≈ 9.6% per year Roughly matching the long-run average for U.S. large-cap equities, which has been around 10% nominal over many decades. The actual year-by-year experience: some years up 30%, some down 35% — but the steady-rate equivalent is 9.6%.

Real estate appreciation

Home purchased for $250,000 in 2015. Worth $385,000 in 2024. CAGR = (385,000 / 250,000)^(1/9) − 1 = 1.54^0.111 − 1 ≈ 4.9% per year Slightly above the long-run national average of 3–4% — typical for a moderate-growth area in a strong housing decade. (This ignores transaction costs, financing costs, taxes, maintenance, and the tax-free imputed rent — full real estate analysis is more complex.)

A bad investment — negative CAGR

Stock purchased for $20,000 in 2018. Worth $14,000 in 2024. CAGR = (14,000 / 20,000)^(1/6) − 1 = 0.7^0.167 − 1 ≈ −5.8% per year A loss of about 5.8% per year compounded — losing roughly a third of the principal over six years. CAGR is negative when ending value is lower than beginning value. Useful for comparing how badly different losing investments performed.

When to use this calculator

Use this calculator any time you want to express a multi-year investment outcome as a single annualized number — for comparing two investments, for evaluating a fund or strategy, for reporting returns to yourself or others, or for projecting forward to a future value.

It's the right tool when there's a clear single beginning value and a clear single ending value, with no major contributions or withdrawals in between. For investments with ongoing contributions (like a 401(k) or DCA savings plan), use the IRR calculator instead — IRR handles irregular cash flows correctly while CAGR cannot.

Pair this calculator with the compound-interest calculator (which projects forward from a known starting value at a known rate — the inverse of CAGR's direction), the investment-returns calculator (multi-period scenarios), and the ROI calculator (total-return, not annualized).

It's less useful for very short periods (a 6-month return annualized makes the result look misleadingly strong or weak) and for highly volatile assets where one outlier year dominates the calculation. Always pair short-period CAGRs with context about volatility and the assumptions baked in.

A common reporting trap: published "average annual return" figures from mutual funds may show either arithmetic average (higher) or geometric average / CAGR (lower). Always confirm which is being shown. Regulated marketing materials usually require CAGR; investor newsletters often use the higher arithmetic figure.

Common mistakes to avoid

  • Confusing CAGR with arithmetic average. The two can differ substantially for volatile investments. CAGR is always the right number for "what was my actual annualized rate" — arithmetic average always overstates real outcomes when returns vary.
  • Annualizing very short periods. A 6-month 20% return is not a 40% annualized return for comparison — single-period extrapolation ignores compounding and volatility risk. Use CAGR over 3+ years for any meaningful comparison.
  • Cherry-picking start and end dates. CAGR is highly sensitive to endpoints. Starting in March 2009 (market bottom) vs. October 2007 (peak) produces very different 15-year CAGRs for the same index.
  • Using CAGR for portfolios with irregular contributions. CAGR assumes no money in or out during the period. If you added $1,000/month to the portfolio during a 5-year horizon, CAGR misrepresents your actual experience — use IRR or money-weighted return instead.
  • Comparing CAGRs from different time periods as if equivalent. A 10% CAGR over the past 3 years and a 10% CAGR over the past 30 years tell very different stories about an investment. Always compare CAGRs over matched periods.
  • Treating past CAGR as a forecast. A high historical CAGR doesn't guarantee future returns; high recent CAGR often reflects "luck" of when you started measuring. Long historical periods are more informative than short ones — but no period is a promise.

Frequently Asked Questions

Sources & further reading

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