CAGR Calculator

To calculate CAGR, use the formula: CAGR = (Ending Value / Beginning Value)^(1/n) − 1, where n is the number of years. For example, an investment that grows from $10,000 to $18,000 over 5 years has a CAGR of (18,000 / 10,000)^(1/5) − 1 = 12.47% per year. Multiply by 100 to express as a percentage.

A fund that "grew 140%" sounds incredible. But over how many years? Ten years of 140% growth is very different from three years of the same number. Raw return percentages without a time dimension are nearly useless for making investment decisions. CAGR — Compound Annual Growth Rate — solves this by converting any investment's total return into a smooth, annualized figure that lets you compare completely different investments on equal footing. It's the single most honest way to measure how fast your money actually grew.

CAGR for Business Growth and Revenue Projections

CAGR isn't only for investment portfolios. Businesses use it constantly. If a company's revenue grew from $2.1 million in 2019 to $6.8 million in 2024, its revenue CAGR is 26.5%. That's meaningful context for investors evaluating the company, lenders assessing creditworthiness, and founders benchmarking against competitors. A 26.5% revenue CAGR in a mature industry is excellent. In a hyper-growth sector, it might indicate the company is losing ground.

And honestly, CAGR helps with personal financial planning beyond investments. If your salary has grown from $58,000 to $94,000 over six years, your income CAGR is 8.4%. If inflation averaged 3.8% over that period, your real income CAGR was only about 4.4% — still good growth, but less impressive than the raw number suggests.

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What CAGR Actually Measures

CAGR is the rate at which an investment would have grown each year if it grew at a perfectly steady pace from beginning to end. It doesn't mean the investment actually grew steadily — markets are volatile, and the ride can be brutal. But CAGR strips away all that noise and asks a simple question: what single annual growth rate, if applied every year with compounding, would have taken your starting value to your ending value over that period?

The formula is clean. CAGR equals the ending value divided by the beginning value, raised to the power of one divided by the number of years, minus one. So if you invested $10,000 and it grew to $18,500 over six years, your CAGR is (18,500 / 10,000)^(1/6) − 1 = 10.8%. Not 85% total return, not 14.2% average annual return (which is a different, less accurate calculation) — 10.8% CAGR. That number can be compared directly to any other investment over any other time period.

Benchmarking Against the Market

Once you've calculated CAGR on your investments, the most valuable thing you can do is compare to benchmarks. The S&P 500 has delivered a CAGR of roughly 10.2% annually over the long run (before inflation). Warren Buffett's Berkshire Hathaway has compounded at approximately 19.8% annually since 1965 — which sounds modest until you realize it's nearly double the market for six decades. Those two numbers, placed side by side, explain why Buffett is considered the greatest investor in history.

Meet James Alcott, a 46-year-old accountant from Denver who'd been managing his own stock portfolio for eight years. He calculated his CAGR: $87,000 invested had grown to $131,400. CAGR of 5.3%. The S&P 500 over the same period had returned about 9.7% annually. James had underperformed the index by 4.4 percentage points per year for eight years — meaning a simple index fund would have grown his $87,000 to roughly $188,200 instead. That gap, $56,800, was the cost of his active management. He switched to index funds the following month.

Getting the Most From Your CAGR Calculation

To use the calculator well, enter your exact beginning and ending values and the precise number of years. Decimals matter. An investment held for 3 years and 8 months is 3.67 years, not 3 or 4. That distinction changes the CAGR output meaningfully for shorter holding periods.

Once you have your CAGR, compare it to three benchmarks: the S&P 500 over the same period, the risk-free rate (10-year Treasury yield at the time), and an industry-appropriate index. If your investment's CAGR is beating all three, you made a genuinely good decision. If it's trailing all three, that's important information too — not cause for regret, but cause for reassessing your approach going forward. The number doesn't lie, and that's exactly why it's worth calculating.

CAGR vs. Average Annual Return: Why the Difference Matters

Here's the thing most people don't realize: CAGR and average annual return often produce different numbers, and CAGR is almost always the more accurate one. Consider an investment that gains 50% one year and loses 33.3% the next. The average annual return is (50% − 33.3%) / 2 = 8.35%. Sounds decent. But the CAGR is exactly 0.0% — because $10,000 grew to $15,000 and then fell back to $10,027. You ended where you started.

This gap between average return and CAGR is called volatility drag. The higher the volatility, the bigger the gap. A crypto portfolio might show an average annual return of 40% while delivering a CAGR of only 18% due to wild swings. Mutual funds sometimes advertise average annual returns knowing that CAGR tells a less flattering story. Always ask for CAGR. Always.

Using CAGR to Compare Investments You've Already Made

Think about it this way: you have three investments made at different times with different amounts. Investment A: $5,000 grew to $8,200 in 4 years. Investment B: $12,000 grew to $17,400 in 5 years. Investment C: $3,500 grew to $7,100 in 7 years. Which performed best? Looking at total dollars gained means nothing — different starting amounts. Looking at percentage gain ignores time. CAGR handles all of it.

Investment A: CAGR of 13.1%. Investment B: CAGR of 7.7%. Investment C: CAGR of 10.7%. Investment A won, even though Investment B produced more total dollars. That's the power of the calculation — it gives every investment a level playing field regardless of size or duration.

The Limitations You Should Know

CAGR assumes steady growth, which real investments never deliver. It doesn't tell you about volatility, drawdowns, or the emotional difficulty of holding through losses. A private equity fund that returned a 22% CAGR might have had three years where it showed negative returns before surging at exit. An index fund returning 10% CAGR did so through 2001, 2002, 2008, and 2020 drops that felt catastrophic in the moment. CAGR tells you the destination, not the journey.

It's also sensitive to start and end dates. A CAGR calculated starting just before a crash looks terrible. The same investment calculated starting just after the crash looks brilliant. Professional investors often calculate rolling CAGRs across multiple time windows — 3-year, 5-year, 10-year — to get a more complete picture rather than relying on a single cherry-picked period.