How It Works
CAGR answers: 'What single, constant annual rate would have taken the beginning value to the ending value over this many years?' It's the standard way to compare growth rates across investments or time periods of different lengths.
Because it's a smoothed average, two investments with the same CAGR can have had very different year-to-year experiences — one steady, one volatile.
Formula
- EndingValue — The value at the end of the period
- BeginningValue — The value at the start of the period
- Years — The number of years between them
Example
Example inputs: $10,000 beginning value, $18,000 ending value, 5 years.
Result: Total growth: 80%. Compound annual growth rate (CAGR): 12.47%.
Frequently Asked Questions
How is CAGR different from average annual return?
A simple average of yearly percentage returns can overstate real growth when returns are volatile, because it doesn't account for compounding. CAGR always reflects the actual beginning-to-ending change.
Can CAGR be negative?
Yes — if the ending value is lower than the beginning value, CAGR will be negative, reflecting an average annual loss.
What's a 'good' CAGR?
This calculator doesn't judge that — it depends heavily on the asset class, time period, and risk taken. Comparing CAGR against a relevant benchmark over the same period is more meaningful than any fixed number.
This calculator provides estimates for informational purposes only and should not be considered financial, tax, or legal advice.