Compound Annual Growth Rate

What the CAGR Calculator Does and Who It's For

This CAGR calculator finds the compound annual growth rate (CAGR) between a starting value and an ending value over a set number of years. It tells you the single, smoothed annual rate that would have turned the beginning amount into the ending amount if it had grown by the same percentage every year.

It is useful for investors comparing the annualized return of stocks, funds, or a portfolio; for business owners measuring revenue, user, or profit growth; and for anyone who wants one clean number to compare investments that grew over different time spans. Because it ignores the bumps along the way, CAGR makes uneven results easy to compare.

How CAGR Is Calculated (The Formula)

CAGR uses the ratio of ending value to beginning value, raised to the power of one divided by the number of years, minus one:

CAGR = (Ending Value / Beginning Value)^(1 / Years) - 1

The exponent 1/Years takes the geometric average, which is why CAGR represents compounding rather than a simple average. Multiply the result by 100 to express it as a percentage. The 'Years' figure is the length of the period, not a count of data points: from a value at the start of 2020 to a value at the start of 2025 is 5 years.

Worked Example With Real Numbers

Suppose you invested $10,000 and it grew to $18,000 over 6 years. Plug the numbers in:

CAGR = (18,000 / 10,000)^(1 / 6) - 1 = (1.8)^(0.1667) - 1 = 1.1029 - 1 = 0.1029, or about 10.3% per year.

That means the same balance would result if your money grew exactly 10.3% each year for 6 years. Notice this differs from a simple average: the total gain is 80% over 6 years, which a naive split would call 13.3% per year, but compounding makes the true annualized return lower at 10.3%.

What CAGR Hides and What Affects It

CAGR only looks at the first and last values, so it ignores volatility and everything in between. Two investments can share the same CAGR while one rose steadily and the other swung wildly. Use it for comparison, not as a guarantee of how any single year performed.

• Time period: a shorter window magnifies the effect of one good or bad endpoint, so the same investment can show very different CAGRs over different spans.
• Endpoint choice: starting or ending on a market peak or trough distorts the rate. Pick meaningful dates.
• Cash flows: basic CAGR assumes no deposits or withdrawals. If you added or removed money, use an IRR or money-weighted return instead.
• Inflation and fees: a nominal CAGR ignores both. Subtract inflation for a real return, and account for fees and taxes for take-home results.

Tips and Common Mistakes to Avoid

Count the years correctly. The most frequent error is using the number of yearly values (for example, 6 annual figures) instead of the number of elapsed years between them (5). For partial periods, use a decimal such as 4.5 years.

CAGR cannot be calculated reliably when the beginning or ending value is zero or negative, because the math breaks down for ratios that aren't positive. In those cases the percentage is meaningless. Finally, remember CAGR is descriptive, not predictive: a strong past rate does not promise the same future return, so treat it as a measuring stick rather than a forecast.