CAGR Calculator: Investment Growth Rate
Calculate the compound annual growth rate (CAGR) of any stock, mutual fund, or investment. Enter the starting value, ending value, and number of years to see your true annualized return.
Enter a positive initial value and a positive number of years.
What CAGR measures and how it’s calculated
Compound annual growth rate answers a specific question: what constant annual return would have taken an investment from its starting value to its ending value over a given period? The formula is:
CAGR = (Ending Value ÷ Beginning Value)1/n − 1 — where n is the number of years.
It smooths a bumpy real-world path into a single comparable number, which is what makes it useful for comparing investments with different shapes and time horizons.
A worked example
An investment grows from $12,000 to $31,000 over 8 years. CAGR works out to about 12.60% a year.
That doesn’t mean it gained 12.60% each year. It might have jumped 40% one year and fallen 15% the next. CAGR is the steady rate that would have produced the same destination.
Why CAGR beats averaging annual returns
This is the reason the metric exists. Suppose an investment gains 50% in year one and loses 40% in year two. The simple average of those returns is +5% a year — which sounds like a gain.
Follow the actual money: $10,000 becomes $15,000, then falls to $9,000. You’ve lost money. The true CAGR is about −5.13%. Averaging percentage returns overstates performance whenever returns vary, and the more volatile the returns, the wider that gap grows. CAGR reflects what your balance actually did.
Common mistakes people make with CAGR
- Reading it as a description of the journey. It describes the endpoints only. Two investments with identical CAGR can have wildly different volatility.
- Using it over very short periods. A CAGR from 18 months of data tells you little that’s predictive.
- Ignoring deposits and withdrawals. If you added money during the period, CAGR on the raw balances will misstate your return. Money-weighted return is the right measure there.
- Projecting it forward. A 12.60% historical CAGR is a record of what happened, not a forecast of what will.
What this calculator doesn’t account for
It uses only your beginning value, ending value and number of years. It doesn’t adjust for inflation, taxes, fees, dividends received in cash, or any contributions and withdrawals along the way. It also says nothing about risk — an investment that reached its ending value through severe swings carries different risk than one that climbed steadily, and CAGR can’t distinguish them.
Frequently Asked Questions
What is CAGR and why is it better than average annual return?
CAGR (Compound Annual Growth Rate) shows the single steady annual rate that would take an investment from its starting value to its ending value, smoothing out year-to-year volatility. A simple average of annual returns can overstate performance when returns swing widely, while CAGR reflects the actual compounded outcome an investor experienced.
How do I use CAGR to compare two different investments?
Calculate CAGR for each investment over the same time period, then compare the percentages directly – the higher CAGR delivered better compounded growth per year. This works whether you’re comparing individual stocks, mutual funds, or an investment against a benchmark like the S&P 500.
Does CAGR account for dividends or contributions along the way?
No, this calculator’s CAGR only reflects the change between one starting value and one ending value, not additional deposits or reinvested dividends made during the period. For an investment with regular contributions, use this site’s Recurring Investment Calculator or Compound Interest Calculator instead.