CAGR answers a simple question that a raw total-growth percentage can’t: what single, smooth annual rate would have produced this exact result?
How it works
Dividing the ending value by the beginning value, raising that ratio to the power of 1 divided by the number of years, and subtracting 1 gives the compound annual growth rate.
What this does not include
This does not include the actual year-to-year path of returns, which CAGR deliberately smooths away — two investments with wildly different volatility along the way can still show the identical CAGR if they share the same starting and ending values.
How to use this calculator
- Enter the beginning value, ending value, and number of years.
A worked example
$10,000 growing to $20,000 over 5 years: CAGR = (20,000/10,000)^(1/5) − 1 = 14.87% per year.
What the variables mean
| Variable | Meaning |
|---|---|
| Beginning value | Starting investment value |
| Ending value | Final investment value |
| Years | Number of years the growth took |
Edge cases worth knowing
CAGR smooths out year-to-year volatility into one steady annual rate. An investment that doubled with wild swings along the way and one that grew steadily both show the same CAGR if they start and end at the same values — it hides the path, not just the endpoint.
A beginning value of zero makes CAGR undefined — there’s no meaningful percentage growth from nothing, so the calculator declines to show a result.
Frequently asked questions
How is CAGR different from an average annual return?
A simple average of yearly returns ignores compounding and tends to overstate the true result; CAGR instead reflects the actual compounded growth rate that connects the two endpoint values.
Can CAGR be negative?
Yes — if the ending value is lower than the beginning value, CAGR comes out negative, representing an average annual decline.
Is CAGR useful for volatile investments?
It’s useful as a summary statistic, but it hides volatility entirely — two investments with the same CAGR can have very different risk profiles along the way, which is why CAGR alone rarely tells the whole story.
