CAGR Calculator – Compound Annual Growth Rate Formula and How to Calculate
A CAGR calculator (compound annual growth rate calculator) gives you the annualized return between two values over a set number of years. Investors use CAGR to compare stocks, mutual funds, and portfolio performance without the noise of year-to-year volatility. This article explains the CAGR formula, how to calculate CAGR, and when to use it—with a link to our free CAGR calculator.
Quick Answer
| Label | Value |
|---|---|
| Beginning value | $10,000 |
| Ending value | $20,000 |
| Years | 5 |
| CAGR | 14.87%" |
How It Works
CAGR formula: CAGR = (Ending value ÷ Beginning value)^(1 ÷ Years) − 1, expressed as a percentage. Example: $10,000 grew to $20,000 over 5 years. CAGR = (20,000 ÷ 10,000)^(1 ÷ 5) − 1 = 2^0.2 − 1 ≈ 0.1487, or 14.87%. So the investment grew at an average of 14.87% per year. CAGR smooths volatility: it assumes the same rate every year, which makes it useful for comparing different investments or time periods.
Additional Notes
CAGR does not show risk or volatility. For irregular cash flows (e.g. multiple deposits or withdrawals), use our XIRR Calculator instead.
Use Our Calculator
Try our CAGR Calculator for your own numbers: /calculators/cagr-calculator
Related Calculators
CAGR (compound annual growth rate) is the average annual return that would turn a beginning value into an ending value over a given number of years, assuming steady growth.
Use the formula: (Ending value / Beginning value)^(1/Years) − 1. Or use our free CAGR calculator with beginning value, ending value, and years.
CAGR is a geometric average that accounts for compounding. Simple average return can overstate growth; CAGR is the standard for comparing investments.
Use CAGR for a single lump-sum investment with one start and one end value. Use XIRR when you have multiple cash flows at different dates.