CAGR Calculator
Created by: Daniel Hayes
Last updated:
Find the annualized compound growth rate between any two values over any time period, with benchmark comparisons against the S&P 500, bonds, savings rates, and inflation.
CAGR Calculator
FinanceFind the annualized compound growth rate between a starting and ending value. Compare your result against common investment benchmarks.
What is a CAGR Calculator?
A CAGR calculator computes the compound annual growth rate between a starting value and an ending value over a specified number of years.
It answers the question: if this investment or metric grew at a constant annual rate, what would that rate have been?
CAGR is widely used to evaluate investment portfolios, business revenue trends, user growth, and any other metric that changes over time.
It smooths out year-to-year volatility and gives a single number that captures the long-run trajectory.
A useful CAGR tool should show the annualized rate, total growth percentage, growth multiple, and a comparison against standard benchmarks like the S&P 500, bond returns, savings rates, and inflation so the result has context.
How the CAGR Calculation Works
The formula raises the ratio of ending value to starting value to the power of one divided by the number of years, then subtracts one.
That produces the annual rate that, when compounded each year, takes you from start to finish.
CAGR does not tell you what happened in between.
A volatile investment and a smooth one can share the same CAGR if their starting and ending values match.
Use the year-by-year projection table to see what consistent compounding at that rate looks like.
Core CAGR relationship
CAGR = (ending value / starting value)^(1 / years) - 1
Total growth = (ending value - starting value) / starting value × 100
Growth multiple = ending value / starting value
Example Scenarios
Example 1: Investment portfolio
A portfolio growing from $50,000 to $93,000 over 8 years has a CAGR of about 8%, slightly below the long-run S&P 500 average.
Example 2: Business revenue
A company going from $2M to $7M in revenue over 5 years has a CAGR near 28%, which signals rapid growth relative to most public companies.
Example 3: Savings account
Moving $10,000 to $12,200 over 5 years in a savings account implies a CAGR of about 4%, roughly in line with current high-yield rates.
How People Use This Calculator
- Measure the annualized growth rate of an investment portfolio or retirement account.
- Compare two investments that have different holding periods on an equal footing.
- Track business revenue, user counts, or other KPIs against industry growth benchmarks.
- Determine what annual return an investment would need to meet a future goal.
Tips for Better CAGR Analysis
CAGR can mask volatility.
Two portfolios with identical CAGRs can have very different year-to-year risk profiles.
Supplement CAGR with standard deviation or maximum drawdown if you are comparing investment strategies.
For investments that received additional contributions or withdrawals during the period, CAGR from start to finish will not reflect actual returns.
Use an internal rate of return (IRR) calculation instead when cash flows are irregular.
Frequently Asked Questions
What is CAGR?
CAGR stands for compound annual growth rate. It is the smoothed annual growth rate that would take a starting value to an ending value over a given number of years, assuming growth compounds each year.
How is CAGR different from average annual return?
Average annual return adds up yearly returns and divides by years, which can overstate performance in volatile periods. CAGR uses only the starting and ending values and is a more accurate measure of how money actually grew.
What is a good CAGR for an investment portfolio?
The S&P 500 has historically returned around 10% annually before inflation. A portfolio CAGR above that benchmark is generally considered strong, though risk level and asset mix matter.
Can CAGR be negative?
Yes. If the ending value is lower than the starting value, CAGR will be negative, representing an annualized loss.
Sources and References
- Corporate finance and investment references on compound annual growth rate methodology.
- CFA Institute and investor education material on measuring and comparing investment performance.