CAGR Calculator
CAGR smooths out the bumpy, unpredictable path an investment actually takes and gives you one clean number: the steady annual growth rate that would have gotten you the same result. It’s the fairest way to compare investments that ran for different lengths of time.
What CAGR actually measures
Real investments almost never grow at the same rate every single year — one year might be up 25%, the next down 8%. CAGR ignores that entire bumpy path and answers a simpler question: if this investment had grown at exactly the same steady rate every year, what would that rate have to be to get from the starting value to the ending value? It’s a hypothetical, smoothed-out number — not a description of what actually happened year to year, but a clean way to compare it to other investments.
EV = ending value · SV = starting value · n = number of years
Why CAGR isn’t the same as averaging each year’s growth
A common mistake is assuming CAGR is just the average of each year’s percentage growth — it isn’t, and the difference matters. Simple averaging treats every year’s growth as if it were added on top of the original amount, which ignores compounding. If a $1,000 investment grows 50% one year and then falls 50% the next, the simple average growth is 0% — but the actual ending value is $750, a real 25% loss. CAGR reflects that real outcome; a simple average does not.
CAGR vs. ROI
ROI tells you total return over the whole period, with no sense of speed. CAGR converts that into a fair, per-year rate — which is why it’s the better tool for comparing investments of different lengths.
CAGR vs. IRR
CAGR assumes one lump sum in, one lump sum out. IRR is built for investments with multiple cash flows in and out over time (like regular contributions), making it more flexible but more complex to calculate.
Frequently asked questions
No. CAGR only looks at the starting and ending values — it has no idea whether the path between them was smooth or wildly volatile. Two investments can have the identical CAGR while one was far riskier to hold than the other.
Yes — if the ending value is lower than the starting value, CAGR will be negative, showing the investment lost value on an annualized basis.
It depends what you’re comparing against. As a rough anchor, the broad stock market has historically averaged around 7–10% annually. A CAGR meaningfully below that suggests the investment underperformed a simple, low-effort alternative; well above it usually means more risk, effort, or both was involved.
No — this shows nominal growth based only on the starting and ending values you enter. Real, spendable returns will typically be lower once taxes, fees, and inflation are factored in.
Want to see the total dollar return instead of the annual rate?
Try the ROI Calculator or Compound Interest Calculator next.
ROI Calculator Compound Interest Calculator Back to Toolkit