About the CAGR Calculator
CAGR (compound annual growth rate) smooths out the ups and downs of real returns into one annual figure. It is useful for comparing investments, businesses, or any value measured over different time periods.
CAGR describes past or hypothetical growth between two points; it does not show volatility along the way and does not predict future results.
How It Works
Divide the final value by the initial value, raise the result to the power of one over the number of years, and subtract one. Total return compares the ending value with the starting value without annualizing.
Both values must be positive. For investments with deposits or withdrawals along the way, CAGR on the start and end balances will not reflect the true rate of return.
Formula
Example
An investment grew from $10,000 to $18,000 over 5 years.
Inputs
- Initial value
- $10,000
- Final value
- $18,000
- Years
- 5
Results
- CAGR
- +12.47%
- Total return
- +80.00%
- Total growth
- +$8,000.00
Growing 12.47% every year for 5 years turns $10,000 into $18,000, even though the actual yearly returns may have varied.
Assumptions & Limitations
- No contributions or withdrawals between the start and end dates.
- Positive start and end values are required; CAGR is undefined for zero or negative values.
- The chart shows a smooth path at the CAGR, not the actual year-to-year values.
Understanding Your Results
- CAGR: The constant annual rate that connects the two values.
- Total Return: Overall percentage change, not annualized.
- Growth Multiple: How many times the initial value the final value is.