CAGR Calculator
Use this tool to calculate compound annual growth rate (CAGR) from a starting value, ending value, and time period.
What is CAGR?
CAGR stands for Compound Annual Growth Rate. It tells you the annualized rate of return that would grow your starting amount to your ending amount over a specific number of years, assuming steady compounding.
In plain English: CAGR turns a messy multi-year return into one clean yearly percentage. That makes it much easier to compare investments, business growth, savings goals, or portfolio performance.
The CAGR Formula
The standard formula is:
CAGR = (Ending Value / Beginning Value)^(1 / Years) - 1
After calculating, convert to a percentage by multiplying by 100. If your result is 0.124, your CAGR is 12.4%.
How to Use This moneychimp CAGR Calculator
- Enter your beginning value (initial investment or starting amount).
- Enter your ending value (final amount after growth).
- Enter the number of years between those two points.
- Click Calculate CAGR to see your annualized return.
The calculator also shows your total return and an estimated “Rule of 72” doubling time based on the calculated annual growth rate.
Example Calculation
Suppose your investment grows from $10,000 to $18,000 over 5 years. Your total return is 80%, but your CAGR is lower because it is annualized.
Plugging into the formula:
(18,000 / 10,000)^(1/5) - 1 = 0.1247, or about 12.47% per year.
This is what makes CAGR useful: it converts a multi-year growth path into one comparable yearly number.
CAGR vs. Average Annual Return
Average Annual Return
A simple average just adds yearly returns and divides by the number of years. It can overstate performance when returns are volatile.
CAGR
CAGR accounts for compounding and better reflects long-term growth from start to finish. For long-range planning, CAGR is usually the better metric.
Important Limitations
- Smooths volatility: CAGR does not show drawdowns or year-to-year swings.
- No cash-flow detail: It assumes only a start and end value (no periodic deposits/withdrawals).
- Past performance: Historical CAGR does not guarantee future returns.
- Before fees/inflation: Raw CAGR may look better than your true real-world return.
When Should You Use CAGR?
- Comparing mutual funds, ETFs, or stock portfolios over the same period.
- Measuring company revenue growth over several years.
- Tracking net worth progression over time.
- Evaluating long-term financial goals like retirement planning.
Quick FAQ
Can CAGR be negative?
Yes. If your ending value is lower than your beginning value, CAGR will be negative.
What if I add money every month?
Basic CAGR is not ideal for recurring cash flows. In that case, use IRR/XIRR for more accuracy.
Is CAGR the same as APY?
They are similar concepts (annualized compounding), but APY is typically used for savings products, while CAGR is broader for investments and growth analysis.
Final Thoughts
If you want one clean number to summarize multi-year growth, CAGR is hard to beat. Use this moneychimp CAGR calculator whenever you need to compare performance quickly and consistently.
Educational use only. This is not financial advice.