CAGR Calculator
Turn a starting value, an ending value, and a time span into one smoothed annual growth rate you can compare across investments.
One comparable number
CAGR converts any start-to-end change into a single annual rate, so you can line up investments of different lengths.
A smoothed average
CAGR hides the bumps along the way — it says nothing about how volatile the ride was.
What is CAGR?
The constant rate that links start to finish
The compound annual growth rate (CAGR) is the single, constant yearly rate that would take a beginning value to an ending value over a given number of years, as if it grew by exactly the same percentage every year. It is one of the most useful ways to express investment performance because it folds an uneven, multi-year change into one annualized figure. As references such as Investopedia explain, CAGR is not the simple average of yearly returns — it is the geometric rate that actually reconciles the start and end values through compounding.
CAGR is the ratio of ending to beginning value, raised to one over the number of years, minus one.
CAGR = (Ending ÷ Beginning)^(1 ÷ Years) − 1The ratio Ending ÷ Beginning is the growth multiple — how many times the money grew. Raising it to the power of 1 ÷ Years finds the yearly rate that compounds to that multiple, and subtracting one converts it from a multiple into a growth rate. Because it uses a power rather than a sum, CAGR captures compounding exactly, which is why it differs from a plain average of annual returns.
An investment grows from 10,000 to 20,000 over seven years. What annual rate does that represent?
Find the growth multiple
20,000 ÷ 10,000 = 2 — the money doubled.Spread it across the years
2^(1 ÷ 7) ≈ 1.1041 — the yearly factor that compounds to a double in seven years.Convert to a rate
1.1041 − 1 = 0.1041, or about 10.41% a year.Check it
Growing 10,000 by 10.41% seven times in a row lands back on roughly 20,000.
CAGR and the simple average of yearly returns are not the same, and the difference grows with volatility.
CAGR is geometric
It reflects actual compounding, so it reconciles the real start and end values.
Averages overstate
A simple average of returns is always at least as high as CAGR, and higher when returns swing.
Volatility widens the gap
A year of +50% then −50% averages 0% but leaves you down 25% — CAGR shows the loss.
This is why CAGR is the honest number for comparing investments: it cannot be flattered by a volatile sequence of returns. When someone quotes an "average annual return," it is worth checking whether they mean the arithmetic average or the compound annual growth rate.
The CAGR is the annual rate your value grew at on a compounded basis. The total growth shows the whole-period change as a percentage, and the growth multiple shows how many times the money grew — a multiple of 2 means it doubled. Read CAGR as a like-for-like comparison tool: a fund up 60% over five years (about 9.9% CAGR) outperformed one up 30% over two years (about 14% CAGR) only if you ignore the time, which CAGR will not let you do. A negative CAGR simply means the ending value was lower than the start. Use it to rank options, not to predict the future, since past growth need not continue.
CAGR is a clean summary, but it is only a summary.
It smooths over the real path
CAGR assumes steady growth that almost never happened in reality — it ignores the volatility, drawdowns, and timing of returns between the two endpoints. It is also sensitive to the choice of start and end dates: picking a low starting point or a high ending point flatters the figure. CAGR ignores cash flows added or withdrawn during the period (use an internal rate of return for that), as well as inflation, taxes, and fees. Treat it as an informational comparison of two points in time, and consult a qualified financial advisor before making investment decisions.