CAGR Calculator
Calculate Compound Annual Growth Rate, or solve it backwards for the ending value or the years needed to reach a target.
Written by Rahman · Last reviewed
Quick answer
CAGR = (end ÷ start)^(1/n) − 1, the constant annual rate that would take the starting value to the ending value over n years. It deliberately smooths away volatility, so two investments with identical CAGR can have had completely different journeys. That makes it useful for comparison and misleading as a measure of risk.
CAGR is the single smooth rate that gets you from the start to the end — real returns are never that even, and it says nothing about the volatility along the way. Figures carry whatever unit you enter, money or otherwise. For a portfolio you keep paying into, use the investment return calculator instead — contributions make start-to-end growth flatter the result.
Results are estimates for general guidance and are not financial, tax or legal advice. Except where a calculator names a currency, figures carry no currency of their own: put in pounds and you get pounds back, put in rupees and you get rupees. Figures depend on the assumptions you enter and on rates that change over time. Check current rates and speak to a qualified adviser before acting on them.
About the CAGR Calculator
Compound Annual Growth Rate (CAGR) is the smoothed annual return rate that a starting value would need to grow at to reach an ending value in a given number of years. It "irons out" yearly volatility into a single representative growth rate, useful for comparing investments, business metrics or any quantity that grows over time.
CAGR does not tell you about volatility or the path taken. An investment that lost 40% in year one and then gained 120% in year two has the same CAGR as one that grew steadily at ~20%, but the experiences and risks were very different. Always complement CAGR with standard deviation or drawdown figures for investments.
CAGR = (End value / Start value)^(1/n) − 1
n is the number of years. Multiply by 100 to express as a percentage.
Why the average annual return overstates performance
Averaging yearly percentage returns is the intuitive way to summarise performance and it is reliably wrong. Percentages compound rather than add, and losses are applied to a base that gains have already changed, so the arithmetic mean of a series of returns is always at least the compound growth rate, and usually higher.
The clearest demonstration is a gain of 50% followed by a loss of 50%. The arithmetic average is zero, suggesting you broke even. In fact $100 becomes $150 and then $75: a quarter of the money is gone. The CAGR over those two years is −13.4%, and that is the figure that describes what actually happened.
- The gap widens with volatility. Two portfolios with identical average returns will have different CAGRs if one is more volatile, and the more volatile one will be lower.
- A doubling followed by a halving averages +25% a year and delivers a CAGR of exactly 0%.
- CAGR is the right measure for comparing investments over a period; the arithmetic mean is not, which is why fund performance is quoted as annualised return.
What CAGR deliberately hides
CAGR describes the single smooth growth rate that would have taken the starting value to the ending value over the period. That is its strength for comparison and its limitation as a description: it is defined entirely by two endpoints and ignores everything between them.
Two investments with identical CAGRs can have had completely different journeys: one rising steadily, the other collapsing and recovering. Anyone who needed to sell partway through experienced those very differently, and the CAGR is silent on it.
- The choice of start and end date can change the figure dramatically. A period beginning at a market low flatters the result.
- CAGR takes no account of money added or withdrawn during the period. Where cash flows in and out, money-weighted return is the appropriate measure.
- It is a historical description, not a projection. A past CAGR carries no commitment about future periods.
Frequently Asked Questions
What is the difference between CAGR and average annual return?
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Average annual return is the arithmetic mean of yearly returns. CAGR is the geometric mean: it accounts for compounding and always gives the "true" rate of growth between two points. CAGR is almost always lower than the arithmetic average for volatile investments.
Can CAGR be negative?
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Yes. If the ending value is less than the starting value, CAGR is negative. This shows the annualised rate of decline.
How is CAGR used in business?
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Common uses: reporting revenue or user growth, comparing competitor growth rates, setting forecast targets, and evaluating investment returns in pitch decks and analyst reports.
What is a "good" CAGR for investments?
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The S&P 500 has delivered roughly 10% nominal / 7% real CAGR over the long run. Individual stocks, private equity and startups vary wildly. Context matters more than the number alone.