CAGR Calculator

The CAGR Calculator shows the compound annual growth rate of an investment. CAGR is the standard metric for comparing investment performance over different time periods.

CAGR Calculator

Currency
$
$
years

What the result means

CAGR is the average annual growth rate that would produce the observed growth if the investment grew at a constant rate. It smooths out year-to-year volatility, giving a single comparable number.

How to use this calculator

  1. 1Enter the beginning value of your investment.
  2. 2Enter the ending value.
  3. 3Enter the number of years.
  4. 4Press Calculate to see the CAGR and total return.
  5. 5Compare CAGRs across different investments to see which performed better.

The formula

The calculation uses a standard, verifiable formula. Here it is in its simplest form.

CAGR = ((Ending value ÷ Beginning value)^(1/years) − 1) × 100

What each variable means

SymbolNameDescription
BBeginning valueThe value of the investment at the start.
EEnding valueThe value of the investment at the end.
YYearsThe investment period in years.

Step-by-step example

Example: ₹10,000 grew to ₹20,000 in 5 years

Beginning value:₹10,000Ending value:₹20,000Years:5
  1. 1CAGR = ((20,000 ÷ 10,000)^(1/5) − 1) × 100
  2. 2= (2^0.2 − 1) × 100
  3. 3= (1.1487 − 1) × 100
  4. 4= 14.87%

Result

14.87% CAGR

What changes the result

  • CAGR assumes constant growth, which real investments rarely achieve.
  • It does not account for volatility or risk.
  • CAGR is best for comparing investments held for different periods.

Edge cases to be aware of

Unusual situations handled correctly

  • If ending value equals beginning value, CAGR is 0%.
  • If ending value is less than beginning value, CAGR is negative.
  • The formula requires positive beginning and ending values.

Common mistakes

Avoid these errors

  • Using simple average return instead of CAGR.
  • Ignoring the time period when comparing returns.
  • Assuming CAGR reflects actual year-by-year performance.

Assumptions

  • The investment grows at a constant rate.
  • No additional contributions or withdrawals are made.
  • Returns are compounded annually.

Limitations

  • Does not reflect volatility or risk.
  • Assumes smooth growth, which is unrealistic for most investments.
  • Past CAGR does not predict future performance.

Frequently asked questions

What is the difference between CAGR and average return?+
Average return is the simple mean of yearly returns. CAGR is the geometric mean, accounting for compounding. CAGR is more accurate for measuring actual growth.
Is a higher CAGR always better?+
Not necessarily. Higher CAGR often comes with higher volatility and risk. Consider risk-adjusted returns and your investment horizon.
How is CAGR different from ROI?+
ROI is the total return over the entire period. CAGR is the annualized return. CAGR lets you compare investments held for different lengths of time.

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