CAGR Calculator
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10
CAGR7.18%
Total Growth100.00%
The compound annual growth rate (CAGR) is the smoothed yearly rate at which an investment would have grown if it had compounded steadily from its starting value to its ending value, ignoring the bumps along the way. This CAGR calculator takes a beginning value, an ending value, and the number of years, then derives that constant annual rate plus the total cumulative growth. It is the standard yardstick for comparing the performance of investments, revenues, or any quantity measured at two points in time.
Formula
CAGR = ((End / Begin)^(1/t) − 1) × 100
- Begin
- Beginning value (must be positive)
- End
- Ending value
- t
- Number of years over which growth occurred
How it works
- Enter the beginning value, which must be greater than zero, and the ending value of whatever you are measuring.
- Enter the number of years between the two values; the calculator takes the (1 ÷ years) root of the growth ratio so each year compounds on the last.
- It reports the CAGR as an annual percentage and the total growth percentage, the simple cumulative change from start to finish.
Worked example
A portfolio that grew from $10,000 to $25,000 over 8 years.
- Growth ratio = 25,000 ÷ 10,000 = 2.5.
- CAGR = 2.5^(1/8) − 1 = 1.1214 − 1 = 0.1214, or 12.14%.
- Total growth = (25,000 − 10,000) ÷ 10,000 × 100 = 150%.
The CAGR is about 12.14% per year, and the total growth over the 8 years is 150%.
Frequently asked questions
- What does CAGR actually tell me?
- CAGR is the single hypothetical rate that, compounded each year, would carry the beginning value to the ending value. It smooths out volatility into one comparable annual figure, which is why it is favored for benchmarking investments and business metrics.
- Does CAGR account for the ups and downs in between?
- No. CAGR depends only on the start value, end value, and time elapsed, so it ignores the path taken. Two investments with very different volatility can share the same CAGR if they begin and end at the same points.
- Why must the beginning value be positive?
- The formula divides the ending value by the beginning value and takes a root of that ratio, which is undefined for a zero or negative starting value. A meaningful growth rate requires a positive base to measure growth against.