What is the CAGR Calculator?
The CAGR Calculator (Compound Annual Growth Rate Calculator) is a powerful tool for investors and anyone who wants to measure investment performance. It calculates the rate at which an investment would have grown if it had grown at the same rate every year. Unlike simple growth rate, CAGR smooths out the volatility and gives a consistent annualized return figure.
This calculator supports three modes:
- Calculate CAGR – find the annual growth rate from start value, end value, and number of years
- Calculate End Value – project an investment's future value using a known CAGR and time period
- Calculate Start Value – determine the initial investment needed to reach a target with a known CAGR
15 world currencies are supported: USD, EUR, GBP, JPY, CHF, CAD, AUD, CNY, RUB, INR, BRL, MXN, KRW, SGD, and NOK.
What is Compound Interest?
To understand CAGR, it helps to understand compound interest first. In finance, compound interest is interest earned not only on the initial principal but also on all accumulated interest from previous periods. The result is exponential growth over time.
The compound interest formula is:
FV = PV × (1 + r/m)mt
Where FV is the future value, PV is the present value, r is the annual interest rate, m is the compounding frequency per year, and t is the number of years. When m = 1 (annual compounding), r becomes the CAGR.
What is CAGR (Compound Annual Growth Rate)?
CAGR stands for Compound Annual Growth Rate. It is the yearly rate of return required for an investment to grow from its beginning balance to its ending balance, assuming profits are reinvested at the end of each year. CAGR represents a smoothed annual growth rate — the constant rate that would produce the same end result.
CAGR is an approximation rather than a true return rate, but it is extremely useful for comparing investments with different time horizons on a like-for-like basis.
Simple Growth Rate vs. CAGR
The Simple Growth Rate (SGR) measures the total percentage increase over the entire investment period, regardless of how many years it spans. It does not account for compounding.
The CAGR, on the other hand, gives you the annualized equivalent growth rate. This is critical when comparing investments that have different durations — a 50% gain over 2 years is very different from a 50% gain over 10 years.
The Simple Growth Rate Formula
To calculate the simple growth rate:
SGR = (FV − PV) / PV × 100
For example, if you invested $1,000 in May 2015 and received $1,300 in May 2018:
SGR = (1300 − 1000) / 1000 × 100 = 30%
This tells you the total return over three years, but not the annual rate.
The CAGR Formula
The CAGR formula is:
CAGR = (FV / PV)1/n − 1
Where:
- FV — Future Value (ending balance)
- PV — Present Value (starting balance)
- n — Number of years
To find the end value from a known CAGR: FV = PV × (1 + CAGR)n
To find the start value from a known CAGR: PV = FV / (1 + CAGR)n
How to Calculate CAGR – An Example
Suppose you invested $10,000 in January 2018 and your portfolio grew to $16,105 by January 2023 (5 years).
CAGR = (16,105 / 10,000)1/5 − 1 = 1.61050.2 − 1 ≈ 10.00%
This means your investment grew at an effective rate of 10% per year, compounded annually.
The Simple Growth Rate for the same period: SGR = (16,105 − 10,000) / 10,000 × 100 = 61.05%
How to Use This CAGR Calculator
- Select your calculation mode: Calculate CAGR, Calculate End Value, or Calculate Start Value.
- Choose your preferred currency from the 15 available options.
- Enter the known values (start/end value, years, or CAGR rate) depending on the mode.
- Click Calculate to see instant results including CAGR, Simple Growth Rate, Absolute Growth, and Growth Multiplier.
- Use the Share button to save or share your calculation via a unique URL.
CAGR Advantages and Disadvantages
Advantages
- Smooths volatility – provides a single, consistent growth rate regardless of year-to-year fluctuations
- Comparability – makes it easy to compare investments with different time horizons
- Simplicity – one number summarizes long-term performance
- Forward planning – useful for projecting future investment values
Disadvantages
- Masks volatility – two investments with identical CAGRs can have very different risk profiles
- Assumes reinvestment – assumes all profits are reinvested each year, which may not reflect reality
- Ignores cash flows – does not account for additional deposits or withdrawals during the investment period
- Can be misleading – a high CAGR over a short period does not guarantee future performance
FAQs
What is a good CAGR?
A "good" CAGR depends on the asset class. For stock market investments, a CAGR of 7–10% annually is often considered reasonable for long-term returns. For startups or high-growth companies, CAGRs of 20–30%+ may be expected. Always compare CAGR to relevant benchmarks.
Can CAGR be negative?
Yes. If your end value is less than your start value, the CAGR will be negative, indicating that the investment lost value over time.
What is the difference between CAGR and IRR?
CAGR measures growth between two fixed points in time with no intermediate cash flows. IRR (Internal Rate of Return) accounts for multiple cash flows at different times and is more appropriate for complex investments with deposits and withdrawals.
Can I use CAGR for non-financial growth?
Absolutely. CAGR is widely used to measure growth in revenue, user base, market share, population, and other metrics — not just financial investments.
Is CAGR the same as average annual return?
No. The average annual return (arithmetic mean) is simply the sum of annual returns divided by the number of years. CAGR is the geometric mean, which accounts for compounding and is always equal to or lower than the arithmetic mean.