CAGR Calculator
Measure annualized growth to compare investment performance across time periods.
What is CAGR?
CAGR stands for Compound Annual Growth Rate. It is the rate at which an investment would have grown if it grew at a steady pace every year. Because real investments go up and down over time, CAGR smooths out volatility and gives you a single percentage that represents the average annual return over a specific period.
Investors use CAGR to compare the performance of different assets — for example, comparing a stock portfolio that grew from $10,000 to $16,000 over five years against a real estate investment or a mutual fund over the same timeframe. Without a standardized annualized rate, comparing assets with different time horizons and starting values is nearly impossible.
How to Calculate CAGR
The CAGR formula is: CAGR = (Ending Value / Beginning Value) ^ (1 / Years) – 1. You take the ratio of the final value to the starting value, raise it to the power of one divided by the number of years, and subtract one. The result is expressed as a percentage. For example, an investment that grew from $10,000 to $16,000 over 5 years has a CAGR of approximately 9.86% per year.
CAGR vs. Average Annual Return
Many people confuse CAGR with simple average annual return. If your portfolio gained 50% one year and lost 20% the next, the simple average is 15%. But the actual CAGR is only about 9.5% — a significant difference. CAGR always accounts for compounding, so it reflects the real growth rate you actually experienced, not an optimistic arithmetic average.
Frequently Asked Questions
What is a good CAGR for an investment?
A good CAGR depends on the asset class and risk level. Historically, broad stock market indices like the S&P 500 have delivered a CAGR of roughly 7–10% per year over long periods after inflation. For individual stocks or growth companies, investors often look for 15–20%+ CAGR, but these come with significantly higher risk.
Can CAGR be negative?
Yes. If your ending value is lower than your beginning value, the CAGR will be negative, indicating the investment lost value on an annualized basis. This is normal — any losing investment will produce a negative CAGR.
Does CAGR account for dividends or withdrawals?
Standard CAGR only compares a beginning and ending portfolio value. If dividends were reinvested, they are captured in the ending value. If you made additional contributions or withdrawals during the period, CAGR alone will not accurately reflect your return — in that case, consider using an internal rate of return (IRR) calculation instead.