CAGR calculator guide
CAGR means compound annual growth rate. It turns a beginning value, ending value, and time period into one annualized growth rate. It is useful because it smooths an uneven multi-year result into a single comparable number.
How to use it
- Enter the beginning value of the investment, business metric, or portfolio.
- Enter the ending value after the full period.
- Enter the number of years between the two values.
Calculation method
A CAGR of 10% means the value grew as if it compounded at 10% per year, even if the actual year-by-year path was volatile.
Example scenario
If $10,000 grows to $25,000 over 7 years, the CAGR is about 14% per year. That does not mean every year earned 14%; it means the full period is equivalent to 14% annual compounding.
When CAGR is useful
CAGR is good for comparing long-term investments, revenue growth, portfolio history, dividend growth, or net worth growth. It is less useful for short periods or highly irregular cash-flow situations.
Important limitation
Pure CAGR ignores deposits and withdrawals during the period. If you added money over time, use CAGR as a rough snapshot, not as a precise performance report.
How to use this calculator
- Enter realistic values that match your current situation.
- Press Calculate to refresh the estimate.
- Compare the main result with the supporting details in the result panel.
- Change one input at a time to see which variable affects the result most.
FAQ
Is CAGR the same as average return?
No. CAGR is compounded annual growth. A simple average return can overstate performance when returns are volatile.
Can CAGR be negative?
Yes. If the ending value is lower than the beginning value, CAGR is negative.
Why use CAGR instead of total return?
Total return shows the whole gain. CAGR shows the annualized pace, making different time periods easier to compare.