CAGR Calculator

Calculate the compound annual growth rate (CAGR) between a starting and ending value over a number of years, with the total return and growth multiple.

CAGR CalculatorEn vivo

Cómo usar esta calculadora

1Enter the starting value of the investment.
2Enter the ending value.
3Enter the number of years over which it grew.
4Read the CAGR — the equivalent steady annual growth rate.

Cómo funciona

Compound annual growth rate

CAGR = (ending value ÷ beginning value)^(1 / years) − 1
total return = ending ÷ beginning − 1
the steady annual rate that compounds to the same result
not the simple average of yearly returns

The compound annual growth rate is the single constant rate at which an investment would have had to grow each year, compounding, to go from its starting value to its ending value over a given number of years. It is found by dividing the ending value by the beginning value, taking the root corresponding to the number of years, and subtracting one. CAGR is the standard way to express a multi-year return because it captures compounding and reduces a messy series of yearly gains and losses to one representative annual figure. It is not the same as the simple average of the annual returns, which ignores compounding and can be misleading — a common trap where an investment that gains 50% then loses 50% has a simple average of zero but a negative CAGR, because it ends below where it started. CAGR always tells the true annualised story.

Ejemplo resuelto

An investment that grows from $10,000 to $20,000 over 7 years has a CAGR of (20,000 ÷ 10,000)^(1/7) − 1 = 2^(1/7) − 1 ≈ 10.4% a year. Its total return is 100% — it doubled — but the steady annual rate that produces that doubling in seven years is only about 10.4%, thanks to compounding.

CAGR Calculator: la guía completa

Why CAGR beats the simple average

When summarising how an investment performed over several years, the naive approach is to average the yearly returns. This is not just imprecise; it can be badly wrong, because it ignores compounding. Consider an investment that gains 50% in year one and loses 50% in year two. The simple average is zero — it sounds like you broke even. But you did not: $100 grows to $150, then falls by half to $75. You lost a quarter of your money, and the CAGR correctly reports a negative annual rate. The simple average flatters volatile returns.

CAGR fixes this by asking a different, more honest question: what single steady rate, compounded each year, would have produced the actual final result? Because it works backward from where the money actually ended up, it can never be fooled by the sequence or the volatility of the returns. This makes CAGR the standard measure for comparing investments, funds, and business metrics over multi-year periods. Whenever you see an annualised return quoted, it is almost always a CAGR, precisely because it is the figure that tells the truth about compound growth.

What CAGR hides

CAGR's great strength — smoothing a bumpy journey into one clean rate — is also its main limitation. By design, it reports only the start and end points and the time between them, saying nothing about the path taken. Two investments can share an identical CAGR while behaving completely differently: one might have risen steadily and calmly, the other might have soared, crashed, and recovered. To an investor who could not stomach the volatility, or who needed to sell at the wrong moment, those two are not remotely equivalent, yet CAGR treats them as the same.

This is why CAGR should be read alongside a measure of volatility, not on its own, when judging risk. It also means CAGR can mislead if the endpoints are unrepresentative — measuring from a market bottom to a peak produces a flattering CAGR that says little about typical performance. And it assumes a lump sum invested at the start; it does not describe the return on money added over time, which requires a different, money-weighted calculation. CAGR answers 'at what steady rate did this grow?' cleanly and reliably, but it is one lens, best used with an awareness of the smoothness it deliberately erases.

Using CAGR in practice

CAGR is one of the most useful numbers in finance because it makes different investments, periods, and quantities directly comparable. A stock that tripled over ten years and one that doubled over four can be compared fairly by their CAGRs, which put both on a common annual footing. It is used to describe the growth of investments, revenues, user bases, populations, and any quantity that compounds. Analysts and investors reach for it constantly precisely because 'grew from X to Y over Z years' is otherwise hard to compare across situations.

The concept also builds financial intuition through its link to doubling time. A CAGR of about 10% doubles money in roughly seven years, by the rule of 72; 7% doubles it in about ten years. Seeing a growth rate as a doubling time makes its long-run power vivid in a way a percentage alone does not. When planning, CAGR lets you project forward too: applying a realistic long-run CAGR to a starting sum estimates its future value, which is the basis of retirement and savings projections. Whether looking backward to measure performance or forward to plan, CAGR is the natural language of compound growth, and computing it from a start value, end value, and time is a skill that pays off across investing and business alike.

Preguntas frecuentes

What is CAGR?

CAGR, the compound annual growth rate, is the single steady annual rate that would grow a starting value to an ending value over a period, compounding each year. An investment doubling in 7 years has a CAGR of about 10.4% — the constant rate that produces that doubling.

How do I calculate CAGR?

Divide the ending value by the beginning value, raise to the power of 1 divided by the number of years, and subtract 1. For $10,000 growing to $20,000 in 7 years: (20,000 ÷ 10,000)^(1/7) − 1 ≈ 10.4% per year.

Why is CAGR better than the average return?

Because it accounts for compounding and can't be fooled by volatility. A 50% gain then a 50% loss averages to zero but actually loses a quarter of your money — CAGR correctly shows the negative rate. The simple average ignores compounding and flatters bumpy returns.

What does CAGR not tell you?

The path taken. Two investments with the same CAGR can be wildly different — one steady, one violently volatile — since CAGR only uses the start and end points. It also assumes a lump sum at the start and ignores risk, so pair it with a volatility measure when judging investments.