What CAGR means
The compound annual growth rate (CAGR) is the constant yearly rate at which a value would have to grow to get from where it started to where it ended. Real investments rarely grow evenly: one year is up 20%, the next down 5%. CAGR smooths that path into a single rate, which makes it easy to compare an investment, a portfolio or a company's revenue over different periods.
CAGR = (ending value ÷ starting value)1 ÷ years − 1
Total growth = ending value ÷ starting value − 1
The number of years may include a fraction, such as 2.5 years. Choose the currency of your amounts in the calculator; it only sets the unit and converts nothing. The rate itself does not depend on the currency.
Worked example
An investment grows from 10,000 to 20,000 over 10 years:
- Growth multiple: 20,000 ÷ 10,000 = 2.00×, a total growth of 100.00%
- CAGR: 21 ÷ 10 − 1 ≈ 7.18% a year
- At that rate the value is about 10,717.73 after one year and 14,142.14 after five years, and reaches 20,000 in year ten.
The table in the calculator shows the value for every whole year at the calculated rate. It is not what actually happened each year; it is the smooth path that has the same start and end.
For a fractional period, an investment that grows from 10,000 to 15,000 in 2.5 years has a CAGR of about 17.61%.
Why the simple average misleads
Suppose an investment gains 50% in the first year and loses 50% in the second. The simple average of the two yearly returns is 0%, which suggests you broke even. In reality, 10,000 became 15,000 and then 7,500. The CAGR over the two years is about −13.40%, which matches the money you actually have. Whenever returns swing, the CAGR is lower than the simple average, and the bigger the swings, the bigger the gap.
CAGR and other measures
CAGR is the same quantity as the annualized return in the ROI calculator when income and costs are left out. Total growth, on the other hand, is the overall percentage change and says nothing about how long it took. To project a value forward at a fixed rate with regular deposits, use the compound interest calculator instead.
Limits of CAGR
- It uses only the starting and ending values. Money you added or withdrew in between is treated as growth or loss, so for a savings plan with regular deposits the CAGR overstates or understates the true return.
- It hides volatility. Two investments with the same CAGR can have taken very different, and very differently risky, paths.
- The result is nominal: inflation, taxes and fees are not removed unless they are already reflected in the values you enter. For US investors, IRS Publication 550 explains how investment gains are taxed.
- A past growth rate is not a forecast, and this page is not investment advice.
