CAGR calculator

What CAGR tells you

Compound annual growth rate (CAGR) answers a simple question: what steady yearly rate would have taken this investment from its starting value to its ending value over the period? It collapses a bumpy real-world ride into one comparable number, which is why it is the standard way to compare investments, funds, or business metrics over time.

The formula

CAGR = (ending value ÷ starting value)^(1 ÷ years) − 1. This calculator does the math and also shows your total return and growth multiple.

Worked example

An investment that grew from $10,000 to $20,000 over 7 years:

• Total return: 100% (it doubled)
• Growth multiple: 2.0x
• CAGR: about 10.4% a year

Notice that doubling over 7 years is “only” ~10.4% annually - compounding means you do not need a huge yearly rate to double your money over time. (The rule of 72 estimates this: 72 ÷ 10.4 ≈ 7 years to double.)

Why CAGR beats a simple average

Suppose an investment gains 50% one year and loses 50% the next. The simple average return is 0%, but you actually lost money: $100 becomes $150, then $75. CAGR captures that real result, while a naive average hides it. Always use CAGR - not the average of yearly returns - to judge compounded performance.

How to use it

• Compare options on equal footing - two funds with the same CAGR delivered the same compounded growth, regardless of how bumpy each ride was.
• Set expectations - plug in a realistic future CAGR to project where an investment could go.
• Check claims - marketing often quotes cumulative or average returns that look bigger than the honest CAGR.

Common mistakes

• Confusing CAGR with the average annual return.
• Reading CAGR as a measure of risk - it says nothing about volatility along the way.
• Using too short a period, where a single good or bad year distorts the rate.

To project growth with ongoing contributions, use the compound interest calculator; to compare reinvesting dividends, see the dividend reinvestment calculator.