Compound Annual Growth Rate (CAGR) Calculator

The compound annual growth rate is the constant annual rate that would take your starting value to your ending value over the period, if growth had been smooth and uninterrupted. It is a single number that summarises a sequence of uneven returns.

The distinction that matters: CAGR describes the path between two points, assuming smoothness. It does not describe what actually happened in between, and it says nothing about the risk taken to get there.

Note. A fund that returns exactly 10% every year and a fund that swings between +30% and -10% can have identical CAGR. They are not equivalent investments. CAGR cannot see volatility.

• Ending value - what the investment is worth at the close of the period.
• Beginning value - what it was worth at the start.
• n - the number of years. Use fractions for part years: 18 months is 1.5.
• Subtract 1 to turn the growth factor into a rate.

The exponent 1/n is what makes this an annual rate rather than a total. Without it you would have the total return, which is not comparable across different time periods.

Reverse the calculation to find the ending value from a target rate: multiply the starting value by (1 + CAGR) raised to the power n. The calculator does both directions.

Identical CAGR, materially different experiences. Investment B required stomach-lining volatility to reach the same destination, and an investor who panic-sold during the -31% year would never have realised the CAGR at all.

This is the central limitation of CAGR as a comparison tool: it rewards the outcome and is silent on the risk. When you compare two funds or two assets, always look at CAGR alongside a volatility or drawdown measure.

The most common CAGR mistake is treating the arithmetic average of annual returns as though it were the compound rate. It is not, and the gap can be large.

The arithmetic average claims you broke even. You lost a quarter of your money. Losses hurt more than equivalent gains help, because a 50% fall requires a 100% gain to recover - the asymmetry is built into the mathematics, not into your psychology.

Note. Only when returns are identical every year does the arithmetic average equal the CAGR. In every other case the arithmetic average overstates the compound result.

• Cash flows. CAGR assumes a lump sum held untouched. If you added money during the period, it describes the growth of neither your money nor your portfolio. For money-weighted results, use the internal rate of return instead.
• Volatility. Invisible to CAGR. Two very different risk profiles produce the same figure.
• Start and end point sensitivity. Shift the window by a year and the CAGR can change dramatically, particularly after a crash or a spike. A five-year figure ending just after a market bottom flatters the result.
• It cannot be averaged. Averaging the CAGR of several years does not give the CAGR of the whole period, for the same reason arithmetic averaging fails.
• Fees and tax are excluded unless you feed in after-fee, after-tax values.

1. Compare only over identical periods. A 3-year CAGR and a 7-year CAGR are not comparable figures.
2. Pair it with a risk measure. CAGR tells you where you arrived; volatility or maximum drawdown tells you what it cost to get there.
3. Check the window. Run the calculation over two or three overlapping periods. If the result swings wildly, the single figure is not representative.
4. Use it for projections cautiously. Applying a historical CAGR forward assumes the future repeats it. It is a scenario input, not a forecast, and it should be stress-tested against a lower rate.
5. Do not average CAGRs. Compute the compound result over the whole span instead.