What is CAGR?
Compound Annual Growth Rate (CAGR) is the rate at which an investment would have grown if it grew at a perfectly steady pace, compounded annually. It smooths out year-to-year volatility into a single comparable number — making it one of the most useful metrics for evaluating investment performance over time.
For example, if a $10,000 investment grows to $18,000 over 6 years, the CAGR is approximately 10.3% — even if some years were up 30% and others down 10%. CAGR tells you the equivalent constant rate that produces the same end result.
How to use this calculator
Enter your beginning value, ending value, and the number of years between them. The calculator instantly returns the annualized CAGR as a percentage. Use it to compare mutual funds, stocks, real estate, or any investment across different time horizons on equal footing.
Frequently Asked Questions
What is a good CAGR?
It depends on the asset class. The S&P 500 has returned roughly 10% CAGR historically (about 7% inflation-adjusted). A CAGR above 15% sustained over a long period is considered excellent. For real estate, 4–6% is typical. Always compare against a relevant benchmark rather than an absolute threshold.
What is the difference between CAGR and average annual return?
Average annual return simply averages the yearly percentage gains. CAGR accounts for compounding — it reflects the actual growth in your ending balance. If an investment goes up 100% then down 50%, the average return is 25% but the CAGR is 0%. CAGR is almost always the more meaningful number.
Can CAGR be negative?
Yes. A negative CAGR means the investment lost value over the period. It is calculated the same way and is a useful signal for comparison against benchmarks or alternative investments.
What are the limitations of CAGR?
CAGR assumes constant growth and ignores volatility entirely. Two investments can share the same CAGR with very different risk profiles. It also ignores interim cash flows — for investments with ongoing contributions or withdrawals, IRR is a more accurate measure.
How is CAGR calculated?
CAGR = (Ending Value ÷ Beginning Value) ^ (1 ÷ Years) − 1. Example: ($18,000 ÷ $10,000) ^ (1 ÷ 6) − 1 = 1.8 ^ 0.1667 − 1 ≈ 10.3%.