CAGR, or compound annual growth rate, shows how fast something grew on average each year between a starting value and an ending value. It turns a messy path of ups and downs into a single annual growth rate, assuming the gains stayed invested and kept compounding over time.
CAGR Calculator
How to use this CAGR calculator
This CAGR calculator is built to be simple enough for everyday use, but detailed enough to match how most finance sites and textbooks define compound annual growth rate. At its core, CAGR answers one question: if your investment or value had grown at a steady rate each year, what percentage rate would get you from the starting value to the ending value over the time period you entered.
The calculator needs only three main inputs and one simple setting:
- Starting value ($): How much the investment or metric was worth at the beginning of the period. For a stock investment, this might be what you originally invested or the portfolio value at the start date.
- Ending value ($): How much it is worth now or at the end of the period. This should include any gains that stayed invested, such as reinvested dividends, if you want the result to match how CAGR is usually defined.
- Time period: How long you held the investment or how long the value was growing. You can enter the time in years or months. The calculator converts months into years so that the CAGR is always an annual rate.
- Period type: Choose whether your time input is in years or months. For example, you could enter 3 and pick years for a three year period, or enter 36 and pick months for the same length of time.
As you edit any of the inputs, the results update automatically. There is no separate calculate button. If the inputs do not make sense for a CAGR calculation, such as a starting value of zero, an ending value of zero or a time period of zero, the calculator shows a clear error message instead of misleading results.
Example: doubling an investment over ten years
Suppose you invested $10,000 in a diversified fund. Ten years later, the investment is worth $20,000, and you did not add or withdraw money in between. If you enter a starting value of $10,000, an ending value of $20,000 and a time period of 10 years, the calculator shows:
- Total growth of about 100 percent over the full period.
- A gain of about $10,000.
- A growth multiple of about 2.00x, since the ending value is twice the starting value.
- A CAGR of a little above 7 percent per year, which is in line with long run averages for broad U.S. stock indexes.
This gives you both the big picture (your money doubled) and the smoothed annual rate (roughly 7 percent per year) in one view.
Tip: Try adjusting only one input at a time. For example, keep the starting and ending values fixed and change the time period. You will see that the shorter the period, the higher the CAGR needed to reach the same ending value, and vice versa.
Reading your CAGR results: rate, gain and growth multiple
The results panel is set up so you can quickly answer three questions: how fast did it grow on average each year, how much did it change in total and how large is the ending value compared with where you started.
The main metrics you will see are:
- Compound annual growth rate (CAGR): This is the headline number, shown in blue. It is the annualized rate that would move you from your starting value to your ending value over the time period you entered, assuming a steady percentage change each year. The formula is based on the ratio of ending value to starting value raised to the power of one divided by the number of years, minus one.
- Total growth (overall return): This is the percentage change from starting value to ending value without annualizing. It shows how much the value rose or fell over the entire period.
- Total gain or loss: This is the dollar difference between the ending value and the starting value. It helps make the percentage moves more concrete.
- Growth multiple: This tells you how many times larger the ending value is than the starting value. For example, a multiple of 1.25x means your ending value is 25 percent higher than where you started.
The breakdown card on the right shows a simple bar style comparison of starting value, ending value and total gain or loss. If the value went up, the ending bar and gain bar will be larger. If the value went down, the gain or loss row highlights how much value was lost compared with where you started.
Because CAGR is an annualized number, it lets you compare investments or growth rates over different time periods. For example, you could compare a three year investment with a five year investment on equal footing by looking at their CAGRs side by side.
| Scenario | Starting value | Ending value | Time period | CAGR (approximate) |
|---|---|---|---|---|
| Moderate long term growth | $10,000 | $20,000 | 10 years | About 7.2 percent per year |
| Shorter period with strong gains | $5,000 | $10,000 | 3 years | About 26 percent per year |
| Investment that lost value | $10,000 | $7,500 | 4 years | About minus 6.9 percent per year |
Note: In negative scenarios, the CAGR will be a negative percentage. That does not mean returns were steadily negative every year. It simply means that if the value had declined at a steady rate each year, that negative rate would match the starting and ending values you entered.
When to use CAGR and when to be careful
CAGR is popular because it compresses a full period of performance into one easy to compare number. It is widely used to compare mutual funds, ETFs, stock performance and even business revenue or profit growth over several years. However, it is just one lens on performance, and it has important limits.
Some key points to keep in mind when you interpret your results:
- CAGR smooths out ups and downs. In reality, investment returns often jump around from year to year. CAGR shows the constant rate that would get you from start to finish, so it can hide volatility. Two investments with the same CAGR may have had very different year by year paths.
- CAGR does not include cash flows in or out. If you regularly add money, withdraw money or reinvest dividends, a simple start and end value may not tell the whole story. For those situations, tools that track each cash flow, such as internal rate of return (IRR), can be more accurate.
- CAGR is not a forecast. A strong historical CAGR does not guarantee that the same rate will continue in the future. Markets, interest rates, company performance and the economy can all change.
- Very high or very low CAGRs can be unrealistic to expect going forward. It is possible to see extremely high CAGRs over short periods, especially for individual stocks or cryptocurrencies. Those results are usually not sustainable as a long term plan.
- Fees, taxes and inflation reduce your real growth. Many examples of CAGR are expressed in nominal terms, before taxes and fees. In practice, investment costs and taxes will reduce your net yield, and inflation will erode purchasing power over time.
For most long term investors, it is helpful to view CAGR alongside other information, such as volatility, worst year returns and how much money you contributed along the way. That bigger picture context can help you decide whether a given investment or growth rate matches your risk tolerance and goals.
Frequently Asked Questions (FAQs)
What is a good CAGR for long term investments?
A reasonable target depends on your mix of investments and your risk tolerance. Historical data for broad U.S. stock indexes show long run average returns in the mid single digit to high single digit range per year, before inflation and fees. Lower risk investments such as short term bonds or savings accounts typically have much lower CAGRs, while highly aggressive portfolios can have higher potential returns but also much higher volatility.
How is CAGR different from average annual return?
CAGR is based only on the starting value, ending value and time period. It finds the single annual rate that would connect those two points and assumes a smooth path. Average annual return usually takes each individual year of performance, adds the yearly percentages together and divides by the number of years. That simple average does not account for compounding and can give a misleading picture when returns bounce around.
Can CAGR be negative?
Yes. If your ending value is lower than your starting value, the calculator will show a negative total return and a negative CAGR. That negative CAGR represents the steady annual rate of decline that would take you from the starting value to the ending value over the time period you entered.
Does this calculator handle monthly data?
Yes. You can enter the time period in months instead of years by choosing months in the period type dropdown. The calculator converts those months into years behind the scenes and still reports an annual CAGR, so your results are comparable with other annual growth rates.
Does CAGR include my deposits, withdrawals or dividends?
No. CAGR in this calculator is based only on starting value, ending value and time. If you actively add or withdraw money or receive dividends in cash instead of reinvesting them, CAGR alone may not capture your true personal rate of return. For that, you may want to look at tools that track each cash flow, such as an internal rate of return or a detailed investment return calculator.