Turn a start and an end into one clean growth rate.
Enter what an investment was worth at the beginning, what it is worth now and how many years passed. See the compound annual growth rate, the total growth, the dollars gained and the smooth path that rate would have traced year by year.
Your investment
CAGR treats growth as one steady rate, as if the value climbed the same percentage every single year, even though the real path was bumpy.
What your numbers mean
The steady growth path
Where the ending value comes from
Starting value vs total gain
The scorecard
CAGR vs simple average growth
The simple average just spreads the total growth evenly across the years. It ignores compounding, so it always reads higher than the true CAGR. The gap grows with the size of the move.
Year-by-year projection
If your value had grown at exactly the CAGR every year, this is the balance it would have shown at the end of each year, with the gain over the year before.
| Year | Projected value | Gain this year | Growth from start |
|---|
CAGR, explained
What CAGR actually measures
Compound annual growth rate is the single steady rate that would carry a beginning value to an ending value over a set number of years. It answers a simple question: if this investment had grown by the exact same percentage every year, what would that percentage be? The real path is almost never that smooth, but CAGR gives you one honest number to compare against a savings rate, an index, or another investment.
The formula, step by step
The math is CAGR = (Ending value divided by Beginning value), raised to the power of one over the number of years, minus one. First you find the total multiple, for example 25,000 divided by 10,000 is 2.5. Then you take the year root of that multiple to undo the compounding, and subtract one to turn it back into a rate. Over 7 years, 2.5 to the power of one seventh is about 1.1398, so the CAGR is roughly 14 percent a year.
Why it beats a simple average
A plain average just divides total growth by the number of years, which quietly assumes each year stacks on the original amount rather than on the growing balance. Because compounding builds on itself, the true rate is always lower than the simple average. Quoting the average makes a return look better than it was, so CAGR is the figure serious investors and fund fact sheets rely on.
Where CAGR falls short
CAGR hides volatility. Two investments can share the same CAGR while one climbed calmly and the other whipsawed through crashes and rebounds. It also depends heavily on the start and end dates you pick, so a period that begins at a low and ends at a high will flatter the rate. Read CAGR alongside the actual year to year swings, not on its own.
Common questions
What is CAGR in plain terms?
CAGR is the steady yearly rate that links a starting value to an ending value over time. It smooths a bumpy real return into one number, as if the investment grew by the same percentage every single year.
What is the CAGR formula?
CAGR equals the ending value divided by the beginning value, raised to the power of one divided by the number of years, minus one. Multiply by 100 to read it as a percent.
How is CAGR different from a simple average return?
A simple average splits total growth evenly across the years and ignores compounding, so it always reads higher. CAGR accounts for growth building on itself, which makes it the lower and more accurate figure.
Can CAGR be negative?
Yes. If the ending value is below the beginning value, the CAGR is negative, showing the average yearly rate at which the investment lost ground over the period.
What years should I use in the calculation?
Use the number of full years between the two values. A value measured at the start of year one and again at the end of year seven spans 7 years, which is the number that goes in the formula.
Does CAGR account for deposits or withdrawals?
No. CAGR only compares two endpoints and assumes no money was added or taken out along the way. If you contributed or withdrew funds, a money weighted return such as IRR describes your experience more accurately.
Estimates for planning only. CAGR smooths a real, bumpy history into one number and says nothing about the swings along the way. Past growth never guarantees future growth, and taxes, fees and inflation all take a bite. Treat this as a guide, not a promise.