CAGR Calculator
CAGR is the single constant rate that would take an investment from its starting value to its ending value. Enter the beginning value, ending value, and number of years to find it.
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Educational purposes only.
CAGR represents a smoothed historical rate and does not predict future performance. Actual year-to-year returns may vary significantly.
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<a href="https://www.stockcram.com/tools/calculators/cagr-calculator" target="_blank" rel="noopener">CAGR Calculator</a>
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</p>What is CAGR?
Compound annual growth rate (CAGR) is the single constant rate that would take an investment from its starting value to its ending value over a given number of years. It smooths away the year-to-year path, describing only the two endpoints and the time between them.
The formula
CAGR = (Ending / Beginning)^(1/years) − 1- Ending = value at the end of the period
- Beginning = value at the start
- years = length of the period, in years
An investment goes from $10,000 to $18,000 over 6 years. The ratio is 18,000 ÷ 10,000 = 1.8. Raising that to the power of 1/6 gives about 1.1029, and subtracting 1 leaves 0.1029: a CAGR of about 10.3% a year. A steady 10.3% compounded for 6 years lands on the same $18,000, even if the actual path was nothing like steady.
The arithmetic average overstates growth
Averaging annual percentage returns overstates growth, and the error grows with volatility. The reason is that a percentage loss and an equal percentage gain do not cancel: losing 50% requires a 100% gain to get back to even.
Consider $100 that gains 50% then loses 25%. The arithmetic average of +50% and −25% is +12.5%, which sounds like healthy growth. The actual path is $100 → $150 → $112.50, and the CAGR is about 6.07%. The average describes the two numbers; the CAGR describes what happened to the money.
CAGR pays for that accuracy with detail. It uses exactly two data points, so everything between them is invisible, and two investments with the same CAGR can have completely different histories: one rising steadily, the other halving and then quadrupling.
| Year 1 | Year 2 | Arithmetic average | Actual CAGR |
|---|---|---|---|
| +50% | −25% | +12.5% | +6.07% |
| +100% | −50% | +25.0% | 0.00% |
| +10% | +10% | +10.0% | +10.00% |
| −40% | +40% | 0.0% | −8.35% |
The two figures agree only when every year is identical. The wider the spread, the further apart they sit.
What CAGR deliberately hides
Ignoring the path makes CAGR useful for comparing endpoints and useless for describing risk. A 12% CAGR reached through a 60% drawdown and a 12% CAGR reached in a straight line are the same number and very different experiences.
Start and end dates change the answer
Because only the endpoints matter, moving either one moves the result, sometimes dramatically. A period beginning at a market low and ending at a high produces a high CAGR; shifting the start date by a few months can change the figure by several percentage points. A stated CAGR only means something alongside the exact window it covers, and comparing two of them measured over different windows compares the windows as much as the investments.
Handling periods that are not whole years
The exponent is 1 divided by the number of years, and that number does not have to be an integer. For 18 months, use 1.5; for 30 months, use 2.5. Rounding a partial period to the nearest whole year distorts short measurements most, because the exponent changes proportionally more.
What this calculator does not account for
- Only the first and last values are used. Any deposits or withdrawals in between are ignored, and will make the result inaccurate.
- The period is measured in years. A CAGR over a period shorter than a year annualizes a small sample and can look extreme.
- No adjustment is made for taxes, fees or inflation.
- A negative ending value cannot be handled, and an ending value of zero gives −100%.
ROI answers how much, with no reference to time at all. CAGR takes that same change and spreads it across the years, which is what makes periods of different lengths comparable. ROI Calculator
How It Works
Enter beginning value
The starting value of your investment at the beginning of the period.
Enter ending value
The current or final value of your investment at the end of the period.
Enter time period
The number of years between the beginning and ending values.
See your annualized return
View CAGR percentage, total return, and absolute gain or loss.
Frequently Asked Questions
CAGR stands for Compound Annual Growth Rate. It measures the smoothed annualized return of an investment over a period of time. Unlike simple average return, CAGR accounts for compounding. It tells you what constant annual return would have been needed to get from the starting value to the ending value.
The CAGR formula is: CAGR = (Ending Value / Beginning Value)^(1/Years) - 1. For example, if $10,000 grew to $20,000 over 7 years: (20000/10000)^(1/7) - 1 = 0.1041, or about 10.41% per year. This means a constant 10.41% annual return compounded over 7 years would produce the same result.
Average return simply adds up yearly returns and divides by the number of years. CAGR accounts for compounding. For example: if an investment goes up 50% one year and down 50% the next, the average return is 0%, but you actually lost 25% (100 → 150 → 75). CAGR correctly shows the annualized loss.
The S&P 500 has historically returned roughly 10% CAGR before inflation over long periods. Individual stocks can have much higher or lower CAGR. Bonds typically have 4-6% CAGR. Savings accounts are usually 1-5%. Asset class and time period drive the number, and higher CAGR generally comes with higher risk.
Yes. If your ending value is lower than your beginning value, CAGR will be negative, meaning your investment lost value on an annualized basis. For example, if $10,000 became $8,000 over 5 years, the CAGR would be about -4.4% per year.