CAGR Calculator
Smoothing Out a Bumpy Ride Into One Growth Rate
An investment rarely grows at a steady pace year over year — it's up 18% one year, down 4% the next. CAGR (Compound Annual Growth Rate) ignores that path entirely and answers a simpler question: what single, constant annual growth rate would have taken the beginning value to the ending value over the period, if it had grown smoothly the whole way?
The Formula
Because CAGR only uses the beginning and ending values, it's blind to volatility along the way — two investments with identical CAGR can have had very different, and very different-feeling, journeys to get there.
Why CAGR Is the Standard Comparison Tool
- Comparing investments over different time periods — CAGR normalizes growth to an annual basis so a 3-year and a 10-year holding can be compared fairly.
- Evaluating fund performance — mutual funds and ETFs commonly report CAGR (sometimes called "annualized return") over trailing periods.
- Setting realistic projections — a historical CAGR is often used as a starting assumption for future growth-rate estimates, with the caveat that past performance doesn't guarantee future results.
Worked Examples
| Beginning Value | Ending Value | Years | CAGR |
|---|---|---|---|
| $10,000 | $20,000 | 5 | 14.87% |
| $10,000 | $15,000 | 10 | 4.14% |
| $5,000 | $7,500 | 3 | 14.47% |
Doubling in value over 5 years is a much higher CAGR than a 50% gain over 10 years — time horizon changes the annualized figure substantially even when the total gain looks comparable.
How to Use This Calculator
- Enter the Beginning Value of the investment.
- Enter the Ending Value.
- Enter the Number of Years between the two values.
- Select Calculate to see the compound annual growth rate.
Related Calculations
Project future growth at a chosen rate with the Investment Calculator, or check risk-adjusted performance with the Sharpe Ratio Calculator.