CAGR Calculator
Turn a start and end value into one smooth yearly growth rate — the standard way to compare investments over different time spans.
The value grew from $10,000.00 to $16,000.00 over 5 years.
The steady curve a 9.86% yearly rate would trace — the real path between the two values may have been bumpier.
CAGR is the steady yearly rate that grows a beginning value into an ending value over a set number of years: CAGR = (end ÷ begin)^(1 ÷ years) − 1. Grow $10,000 into $16,000 over 5 years and the CAGR is 9.86% per year, even though the total growth is 60%.
What CAGR is
The compound annual growth rate (CAGR) is the constant yearly rate that would take an investment from its starting value to its final value over a given period, as if it grew by the same percentage every year. It answers a simple question: if the ups and downs were ironed out into one smooth line, how fast did this grow per year? Because it accounts for compounding, CAGR is the standard way to compare investments, funds, or revenue that were held for different lengths of time.
begin is the starting value, end the ending value, and n the number of years; multiply by 100 for a percentage
Worked example
An investment grows from $10,000 to $16,000 over 5 years.
- 1 Divide the ending value by the beginning value. $16,000 ÷ $10,000 = 1.6, so the money grew to 1.6× its start.
- 2 Raise the ratio to the power 1 ÷ years. 1.6^(1 ÷ 5) = 1.6^0.2 ≈ 1.09856 — this is the yearly growth factor.
- 3 Subtract 1. 1.09856 − 1 = 0.09856, the growth rate as a decimal.
- 4 Multiply by 100 for a percentage. 0.09856 × 100 ≈ 9.86% per year — the CAGR.
- 5 Compare with total growth. (1.6 − 1) × 100 = 60% total, which compounding spreads into ≈ 9.86% each year.
Same total return, different periods
A 60% total gain ($10,000 → $16,000) turns into a very different yearly rate depending on how long it took. The longer the period, the lower the CAGR.
| Years | Total growth | Multiple | CAGR |
|---|---|---|---|
| 2 | 60% | 1.6× | 26.49% |
| 3 | 60% | 1.6× | 16.96% |
| 5 | 60% | 1.6× | 9.86% |
| 10 | 60% | 1.6× | 4.81% |
| 20 | 60% | 1.6× | 2.38% |
Reading the result
CAGR smooths out the bumps. Real investments jump around — up 30% one year, down 10% the next. CAGR ignores that path entirely and reports the single steady rate that connects the start and end points. It is a summary of the whole journey, not a description of any single year.
It is not the average of yearly returns. Averaging annual percentages (the arithmetic mean) overstates growth because it ignores compounding. A year of +50% followed by a year of −50% averages to 0%, but $100 becomes $150 then $75 — a real loss. CAGR captures that correctly as about −13.4% per year, which is why it, not the simple average, is used to compare performance.