CAGR Calculator

A CAGR (Compound Annual Growth Rate) calculator converts a multi-year investment result into a single, smoothed annualized growth rate. It answers: "If this investment had grown at the same constant rate every year, what would that rate be?" By collapsing volatile year-by-year returns into one number, CAGR makes cross-investment comparisons honest.

Use CAGR for any growth you want to summarize over time — investment portfolios, a startup's revenue, a country's GDP, your home's value. It is the geometric mean of annual growth, not the arithmetic mean, which is why it's the right choice when returns compound. The trade-off is that CAGR hides volatility: a 10% CAGR could come from a steady 10%/year or from wild swings averaging 10%.

You invested $10,000 in an index fund 7 years ago. Today the position is worth $19,500:

• Total growth: ($19,500 / $10,000) − 1 = 95%
• CAGR: (19,500 / 10,000)^(1/7) − 1 = 1.9500^0.1429 − 1
• CAGR = ~10.01% per year

Even though the absolute return (95%) sounds dramatic, the annualized rate of ~10% is right in line with the long-run S&P 500 average. CAGR provides the proper benchmark — comparing 95% to a single year's market return would be misleading.

• Comparing investment funds — a 5-year CAGR is the standard cross-fund metric.
• Tracking business growth — revenue CAGR, customer-count CAGR, and ARR CAGR are common board metrics.
• Real estate appreciation — what annualized return did your home actually deliver?
• Country & macroeconomic data — GDP and population growth are reported as CAGR over decades.
• Goal-setting — work backwards: at what CAGR would my portfolio need to grow to reach $1M in 20 years?

• Using CAGR with cash flows. If you added money over time, CAGR understates or overstates your real return. Use IRR or money-weighted return instead.
• Hiding volatility. A 12% CAGR over 10 years could include a year of −40%. Always look at the worst-year drawdown alongside CAGR.
• Cherry-picking start dates. Starting at a market low inflates CAGR; starting at a peak depresses it. Use multiple windows for honesty.
• Ignoring inflation. A 7% nominal CAGR with 3% inflation is a 4% real CAGR. For long-term planning, real CAGR matters more.
• Confusing CAGR with average return. Arithmetic average is always at least the CAGR; the gap widens with volatility (this is why "variance drag" reduces compounded returns).