CAGR Calculator

What is the CAGR Calculator?

CAGR (Compound Annual Growth Rate) is the smoothed annual rate at which an investment would have grown if it had compounded steadily over a period. It converts an overall return into a single, comparable “per year” figure, regardless of how bumpy the actual journey was.

How does it work?

The calculator takes the starting value, the ending value and the number of years, then finds the constant annual rate that turns the beginning amount into the ending amount through compounding. Because it ignores interim volatility, CAGR is excellent for comparing different investments over the same horizon.

Formula

CAGR = (Ending Value / Beginning Value)^(1 / n) − 1

• Ending Value = final value of the investment
• Beginning Value = initial value invested
• n = number of years

Example calculation

Benefits

• ✓Provides a single, comparable annual growth figure across investments.
• ✓Removes the distortion of an uneven, year-to-year return path.
• ✓Widely used to judge mutual funds, stocks and business metrics.

Limitations

• !Assumes smooth compounding and hides interim volatility or drawdowns.
• !Does not reflect additional investments or withdrawals during the period.
• !A high CAGR over a short period can be misleading.

Conclusion

CAGR is one of the most useful yardsticks for comparing long-term performance. Pair it with a measure of risk or volatility for a fuller picture before drawing conclusions about an investment.