CAGR Calculator: Compound Annual Growth Rate

Work out your average return per year over a period.

Calculate CAGR, the compound annual growth rate of an investment, from its starting and ending value or from its total return in percent.

CAGR stands for compound annual growth rate. It shows how much an investment has grown on average per year over a period, with compounding taken into account. With the calculator, you can find the CAGR from either the starting and ending value or the total return in percent.

How to use the calculator

First, choose the start and end date of the period. The calculator measures the length of the period in days and converts it to years with decimals, so you can also measure periods that are not whole years, such as from a purchase in April until today.

Then choose how you want to enter the growth:

• Total return in percent: enter the combined return for the whole period, for example 100% if the value has doubled.
• Start and end values: enter what the investment was worth at the start and end of the period.

The result shows the CAGR, the total return and the simple average per year, so you can see the difference between the two ways of calculating an average. The chart shows how the starting value would grow year by year if it rose by exactly the CAGR every year.

How CAGR is calculated

The formula behind the calculator is:

CAGR = (ending value / starting value)^(1 / number of years) - 1

The number of years is the number of days between the two dates divided by 365.25. In other words, CAGR is the fixed annual rate that, compounded, would take the starting value exactly to the ending value.

Example

An investment grows from €10,000 to €20,000 in ten years. The total return is 100%, so the simple average is 10% per year. The CAGR, however, is:

(20,000 / 10,000)^(1/10) - 1 = 7.18% per year

CAGR is lower than the simple average because each year's growth builds on the growth of earlier years. An investment that grows 7.18% a year with compounding doubles in ten years. If it grew 10% a year instead, it would end up at about €25,900, not €20,000.

What can you use CAGR for?

CAGR lets you compare investments over different time periods. A 40% return over four years and a 76% return over eight years look very different at first glance, but they equal a CAGR of about 8.8% and 7.3% respectively, and suddenly you can compare them side by side.

For example, you can measure your own portfolio against the major stock indexes. On the index data page, you can see the CAGR for those indexes over any period you choose.

If you want to use a CAGR to project your future savings, enter it as the return in the compound interest calculator and see what your savings could grow to over time.

Keep in mind

CAGR only describes the journey from start to finish. Two investments with the same CAGR may have taken completely different paths, one steady and the other with sharp drops along the way. So the number tells you nothing about risk. It also does not account for inflation: a CAGR of 7% while inflation has been 2% equals just under 5% in real growth.

Sources

The calculator works entirely from the numbers you enter and does not fetch any external market data. Past returns are no guarantee of future returns.

Frequently asked questions

What is CAGR?

CAGR stands for compound annual growth rate. It shows the percentage an investment would have had to grow every single year to get from its starting value to its ending value, with returns compounding along the way. CAGR lets you compare investments held over different periods, because everything is converted to growth per year.

What is the CAGR formula?

CAGR is the ending value divided by the starting value, raised to the power of one divided by the number of years, minus one. For example, if an investment grew from €10,000 to €20,000 in ten years, CAGR is (20,000/10,000)^(1/10) minus 1, or about 7.18% per year.

What is the difference between CAGR and average annual return?

The simple average divides the total return by the number of years, while CAGR accounts for returns compounding year after year. When returns swing a lot, the simple average can be misleading. If a €10,000 investment rises 50% one year, it is worth €15,000. If it then falls 50% the next year, it is worth €7,500. The simple average of the two years is 0%, but you have actually lost 25%, which equals a CAGR of about -13.4%.

Can CAGR be negative?

Yes. If the ending value is lower than the starting value, CAGR is negative and shows the average annual loss. For example, if an investment falls from €10,000 to €8,000 over three years, CAGR is about -7.2% per year.

Does CAGR account for regular contributions?

No. CAGR assumes a single amount that grows from start to finish, with no deposits or withdrawals along the way. If you have been adding money regularly, part of the growth comes from your own contributions, and CAGR will overstate your return. To calculate savings with monthly contributions, use the compound interest calculator instead.

Try the compound interest calculator

What is a good CAGR?

It depends on what you invest in and how long the period is. Broad stock indexes such as the MSCI World have historically returned around 7% a year over long periods, before inflation, taxes and fees. A CAGR at that level over many years is therefore solid for a broad stock portfolio. Over short periods the number swings a lot and says less about the quality of the investment.