In short
CAGR is the steady yearly rate that would take a starting value to an ending value over a period. It smooths out ups and downs, which makes it the standard way to compare the growth of investments, businesses or prices over different periods.
The CAGR formula
CAGR = (ending value ÷ starting value)^(1 ÷ years) − 1. The result is a yearly percentage, even if the real value rose and fell along the way.
Worked example
An investment grows from 10,000 to 20,000 in 5 years. CAGR = (20,000 ÷ 10,000)^(1/5) − 1 = 14.87% a year. The total return is 100%.
A fall from 50,000 to 42,000 over 3 years is a CAGR of −5.65% a year.
CAGR versus average return
The simple average of yearly returns can mislead. Gain 50% one year and lose 50% the next and the average is 0%, but you have lost a quarter of your money: the CAGR is −13.4%. CAGR shows what actually happened to the value.
What CAGR does not show
It ignores how bumpy the ride was and assumes no money was added or taken out. For regular monthly investing, use the investment calculator instead.
Frequently asked questions
Can CAGR be negative?
Yes. If the ending value is lower than the starting value, the CAGR is negative. If it drops to zero, the CAGR is −100%.
Can I use part years?
Yes. Enter months as a fraction of a year, for example 2.5 for two and a half years.
What is a good CAGR?
It depends on what you are measuring and the risk involved. Compare it with inflation and with alternatives over the same period.
Does the table show real past values?
No. It shows the smooth path at a constant CAGR, which ends at your real ending value.
Methodology
CAGR = (end ÷ start)^(1/t) − 1, with t in years. Total return = end ÷ start − 1. The table applies the CAGR each year from the starting value. Values are rounded for display only.
This calculator gives estimates for information only and is not financial advice. Past growth does not guarantee future results.
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