How this CAGR calculator works
Compound annual growth rate (CAGR) describes how an investment or any value would have grown if it increased at the same steady rate every year. Real returns rarely arrive in equal yearly steps, so CAGR smooths the whole journey from a beginning value to an ending value into one constant annual percentage. That makes it easy to compare investments held for different lengths of time on equal footing.
The formula is CAGR = (end ÷ start)1 ÷ years − 1. You divide the ending value by the beginning value to get the total growth factor, raise it to the power of one divided by the number of years to spread that growth across the period, then subtract one to convert it back into a rate. Multiplying by 100 turns it into a percentage. A negative result means the value declined on average each year.
This tool also reports the total growth over the whole period — (end ÷ start − 1) × 100 — and the absolute change in value (end − start). When the inputs are valid it shows a short year-by-year projection of what the beginning value would be worth at the end of each year if it grew at exactly the CAGR.
Reference note: these figures are simple CAGR math and do not account for taxes, fees, dividends, additional contributions, inflation, or risk. Results are an estimate, not financial advice.
Frequently asked questions
- What is CAGR?
- CAGR, or compound annual growth rate, is the steady yearly rate at which a value would have to grow to go from its beginning amount to its ending amount over a given number of years. It smooths the ups and downs of the period into a single annual percentage.
- How is CAGR calculated?
- CAGR equals the ending value divided by the beginning value, raised to the power of one divided by the number of years, minus one: CAGR = (ending / beginning) ^ (1 / years) − 1. Multiply by 100 to express it as a percentage.
- What is the difference between CAGR and average annual return?
- A simple average annual return adds up each year's returns and divides by the number of years, ignoring compounding. CAGR reflects compounding, giving the single constant rate that connects the start and end values. CAGR is usually lower than the simple average when returns vary, making it a fairer measure of growth over time.
- What is a good CAGR?
- There is no universal good number because it depends on the asset, the risk taken, and the time period. A higher CAGR is generally better, but it should be compared against a relevant benchmark and the inflation rate. Context matters more than the raw figure.
- Can CAGR be negative?
- Yes. If the ending value is lower than the beginning value, the growth rate is negative, representing an average yearly decline. For example, a value falling from 1,000 to 800 over two years has a negative CAGR of about −10.6% per year.
- Is this financial advice?
- No. This calculator is an informational tool that performs basic CAGR math. It does not account for taxes, fees, inflation, or risk, and it is an estimate, not financial advice. Consult a qualified professional before making investment decisions.