CAGR Calculator
The single constant yearly rate that connects a beginning value to an ending one: CAGR smooths the ride into one honest average for comparing investments of different lengths.
The growth rate with the bumps ironed out — on purpose
CAGR answers a precise question: at what constant yearly rate would this beginning have become this ending? Companies report it, funds are compared by it, and plans are built on it — because it makes different periods comparable. What it never claims is that the journey was smooth.
CAGR = (ending ÷ beginning)1/years − 1
Example: $10,000 to $20,000 in 7 years: CAGR = 10.41%. The famous rule of thumb confirms it — money doubling in about 7 years takes about 10% (the Rule of 72 says 72 ÷ 7 ≈ 10.3%, close enough to trust across a table).
CAGR vs average return: the volatility tax
An investment up 50% then down 50% has an average return of 0% and a CAGR of −13.4% a year across the two — because it ends at 75% of its start. Arithmetic averages flatter volatile series; CAGR never does, because it is chained to the endpoints, and endpoints are where the money actually is.
How this is calculated
CAGR = (end ÷ start)^(1/years) − 1, expressed as a percentage. Fractional years are accepted (2.5 years is fine). The formula assumes a single inflow at the start and a single value at the end — intervening contributions belong to money-weighted measures (IRR), which this page does not pretend to compute.
Frequently asked questions
Can CAGR be negative?
Yes — any end below the start produces one, and it reads as the constant yearly rate of shrinkage. A halving over 10 years is a CAGR of about −6.7%.
Why do funds quote CAGR over odd periods?
Because endpoints can be chosen: a fund measured from a market bottom looks brilliant. Always check what the endpoints are before respecting the number — cherry-picked windows are the oldest trick in the brochure.
CAGR or total return for comparing two funds?
CAGR when the periods match (both 5-year, say). Total return when the period is identical and short. Mixing the two across different windows misleads systematically.
Does CAGR include dividends?
Only if the ending value does — i.e., if dividends were reinvested into the measured position. Price-only series understate equity returns by the dividend yield, year after year.
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