How it works
CAGR — compound annual growth rate — answers the question every return figure dodges: what steady yearly rate would have carried this investment from its start to its finish? Real returns arrive in lumpy, volatile years; CAGR smooths them into a single equivalent rate, which is the only honest way to compare two investments held over different periods. The formula takes the ending value divided by the beginning value, raises it to the power of one over the years, and subtracts one. $10,000 growing to $25,000 over seven years is a CAGR of about 14% — the same as if it had compounded at a perfectly flat 14% every year. The calculator also shows the total return and the growth multiple, which tell the same story in raw terms. Two cautions keep the number honest. CAGR sees only the endpoints, so a smooth climb and a violent round-trip with the same start and finish share an identical figure — pair it with the worst drawdown before trusting a track record. And it assumes nothing was added or withdrawn along the way; portfolios with regular contributions need a money-weighted return instead.
Formula
CAGR = (ending / beginning)^(1 / years) - 1
Tips
- CAGR is the only fair way to compare investments held over different periods.
- It sees only the endpoints — a smooth climb and a volatile round-trip can share a CAGR.
- Judge it against a benchmark over the same years, not in isolation.
- It assumes nothing was added or withdrawn; regular contributions need IRR instead.
- A negative CAGR is the annualized rate at which value leaked away.
Frequently asked questions
- What is CAGR?
- Compound annual growth rate — the single steady yearly rate that would carry an investment from its start to its end value. It smooths volatile year-to-year returns into one comparable figure. $10,000 becoming $25,000 over seven years is a CAGR of about 14%.
- How do I calculate CAGR?
- Divide the ending value by the beginning value, raise the result to the power of one divided by the number of years, then subtract one. The calculator does this instantly and also shows total return and the growth multiple.
- What is the difference between CAGR and total return?
- Total return is the whole gain over the period; CAGR is that same gain expressed as an equivalent annual rate. Total return ignores time — a 150% gain over 7 years and over 20 are the same number until CAGR separates them.
- What is a good CAGR?
- It depends on the asset, but judge it against a benchmark over the same years. The US stock market has returned roughly 10% a year nominally over long periods, so a stock portfolio CAGR is best read against that. Beating it consistently is rare.
- What are CAGR's limits?
- It only sees the start and end points, so it hides volatility — a smooth climb and a violent round-trip can share a CAGR. It also assumes no money was added or withdrawn, so portfolios with regular contributions need a money-weighted return (IRR) instead.