CAGR Calculator
Compound annual growth rate (CAGR) is the standard measure of investment performance over multi-year periods. Unlike simple average returns, CAGR is a geometric mean that accurately represents the per-year rate that would have compounded from the starting to ending value. It is used to compare investments of different lengths, express historical stock returns, and evaluate business revenue and earnings growth. Enter the beginning value, ending value, and number of years to instantly compute the CAGR and see how a $10,000 investment would have grown at that rate.
CAGR formula
CAGR = (ending value / beginning value)^(1 / years) - 1
Total return = (ending value / beginning value) - 1
The exponent 1/years is the key: it takes the n-th root of the total return factor, converting a multi-year return into an equivalent annual rate. For example, $10,000 growing to $25,000 in 10 years gives CAGR = (25000/10000)^0.10 - 1 = 2.5^0.10 - 1 = 9.60%.
Uses of CAGR in investing
- Comparing funds or stocks over different time periods on a like-for-like basis.
- Evaluating company revenue or earnings growth rates reported in SEC filings.
- Setting realistic return expectations for financial planning.
- The Rule of 72: dividing 72 by the CAGR gives the approximate years to double in value.
- CAGR does not capture volatility: two portfolios with identical CAGR can have very different risk profiles.
Frequently asked questions
What is CAGR?
CAGR (compound annual growth rate) is the rate at which an investment would have grown each year if it grew at a steady rate. It smooths out year-to-year volatility to provide a single annual rate representing growth from start to end.
How is CAGR different from average annual return?
Average annual return is the arithmetic mean of yearly returns. CAGR is the geometric mean. CAGR is more accurate for measuring actual investment performance because it accounts for compounding. For example, if an investment rises 50% then falls 33%, the average is 8.5% but the actual CAGR is 0% because the investment returned to its starting point.
What does a CAGR of 10% mean?
A CAGR of 10% means the investment grew at an equivalent annualized rate of 10% every year over the measurement period. In reality returns may have varied significantly each year; CAGR represents the smoothed equivalent.
What is a good CAGR for stocks?
The S&P 500 has historically returned approximately 10% per year (nominal) since 1957, representing a widely cited benchmark. Individual stocks and portfolios vary widely. A CAGR above the index is considered outperformance; below is underperformance.
Can CAGR be negative?
Yes. If the end value is less than the start value, CAGR is negative, indicating a net loss over the period. The formula (end/start)^(1/years) - 1 handles this correctly as long as both values are positive.
Official sources
- Federal Reserve FRED: S&P 500 Historical Data.
- SEC EDGAR: Annual Reports for Revenue and Earnings Growth.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.