Compound annual growth rate — the constant yearly rate that would take a value from its start to its end over the period. It smooths out volatility: growing from $10,000 to $18,000 in 5 years is a CAGR of 12.5%, regardless of the bumpy path in between.

CAGR Calculator

Q: What is the CAGR formula?

CAGR = (Ending value ÷ Beginning value)^(1/years) − 1. It's the geometric mean growth rate, which is why it's lower than the simple average of yearly returns whenever returns vary.

Q: Why is CAGR lower than average annual return?

Because losses hurt more than equal gains help. Gain 50% then lose 50% and you're down 25% overall — the arithmetic average says 0%, but CAGR correctly reports about −13.4% per year. CAGR reflects what your money actually did.

The compound annual growth rate — the single number that lets you compare any two investments, businesses, or metrics on equal footing.

Compound annual growth rate

—

Total growth

—

Growth multiple

—

Doubling time at this rate

—

The CAGR formula

CAGR = (End ÷ Start)^1/years − 1

Worked example

$10,000 grows to $18,000 in 5 years:

CAGR = (18,000 ÷ 10,000)^1/5 − 1 = 1.8^0.2 − 1 = 12.5% per year

Where CAGR shines — and where it hides things

CAGR is the honest way to compare a 3-year investment against a 7-year one, a stock against a business's revenue growth, or your portfolio against an index. But it deliberately smooths the path: an investment that went +80%, −40%, +25% has the same CAGR as one that returned 12.5% steadily, yet very different risk. Use CAGR to compare outcomes, not to forecast a smooth ride. For a portfolio with ongoing contributions, CAGR of the balance overstates skill — contributions aren't growth; model those with the investment calculator instead. Related: total-period ROI, and the Rule of 72 for quick doubling-time estimates (72 ÷ CAGR ≈ years to double).

Frequently asked questions

What is CAGR?

The constant annual rate that takes a value from start to end over the period — volatility smoothed out.

What is the CAGR formula?

(End ÷ Start)^1/years − 1 — the geometric mean growth rate.

Why is CAGR lower than average annual return?

Losses outweigh equal gains: +50% then −50% averages 0% but compounds to −25% total (≈ −13.4%/yr CAGR).

Related calculators

Note: CAGR assumes no intermediate contributions or withdrawals. Not investment advice. Last reviewed: July 2026.