CAGR Calculator
Calculate the Compound Annual Growth Rate (CAGR) of an investment, or project future value using expected growth rate.
Compound Annual Growth Rate (CAGR)
8.45%
Absolute Return
$50,000.00
Total Return
50.00%
Years
5
CAGR Formula
Growth Projection
| Year | Growth | Value |
|---|---|---|
| 0 | — | $100,000.00 |
| 1 | $8,447.18 | $108,447.18 |
| 2 | $9,160.73 | $117,607.90 |
| 3 | $9,934.55 | $127,542.45 |
| 4 | $10,773.74 | $138,316.19 |
| 5 | $11,683.81 | $150,000.00 |
What is CAGR?
Compound Annual Growth Rate (CAGR) represents the smoothed annual rate of return of an investment over a given time period, assuming profits are reinvested at the end of each year. It removes the effect of volatility and provides a single annualized growth rate.
How to Use
- 1
Choose a mode: Standard CAGR, Exact Dates, or Future Value
- 2
For CAGR: enter present value, future value, and number of years
- 3
For Exact Dates: enter values and specific start/end dates
- 4
For Future Value: enter present value, expected CAGR, and years
- 5
View the growth rate, year-by-year table, and KaTeX formula
- 6
Understanding the key inputs — CAGR smooths out volatility to give a single annualized growth rate, showing what constant rate would produce the same result
- 7
Interpreting the results — the year-by-year table shows how the investment would grow at a constant rate each year, even though real investments fluctuate
Examples
Good Examples
Standard CAGR
$100,000 → $150,000 in 5 years = 8.45% CAGRFuture value projection
$50,000 at 10% CAGR for 10 years = $129,687Date-based CAGR
$10,000 (Jan 2020) → $18,000 (Jul 2024) = 15.51% CAGRComparing investment performance
Fund A: $10K → $16K in 5 years (9.86% CAGR); Fund B: $10K → $14K in 3 years (11.87% CAGR) — Fund B grew faster despite a shorter periodProjecting retirement savings
Current portfolio $200,000 at 7% CAGR for 25 years = $1,085,474 — useful for long-term retirement planningBad Examples
Using CAGR as a guarantee
Past CAGR does not predict future performanceIgnoring volatility
CAGR hides year-to-year swings — a 10% CAGR could mean -20% then +40%Using CAGR with irregular cash flows
If you made additional deposits or withdrawals during the period, CAGR is misleading — use IRR (Internal Rate of Return) insteadCommon Mistakes
- Confusing CAGR with simple average return — CAGR accounts for compounding
- Using CAGR as a guarantee of future returns
- Ignoring volatility — CAGR hides the ups and downs
- Choosing misleading start/end dates that skew the result
- Using CAGR for investments with interim cash flows — use IRR instead
- Not recognizing that CAGR can be negative — a negative CAGR means the investment lost value over time
- Comparing CAGR across different time periods — a 3-year and 10-year CAGR are not directly comparable without context
Frequently Asked Questions
What is a good CAGR?
A "good" CAGR depends on the context. For stock market investments, a CAGR of 7–10% over 10+ years is considered solid (roughly matching the historical S&P 500 average). For a startup, 20–30% CAGR may be expected. Always compare CAGR to relevant benchmarks.
Can CAGR be negative?
Yes, a negative CAGR means the investment lost value over time. For example, if 7,000 over 3 years, the CAGR is approximately -11.2%.
What is the difference between CAGR and IRR?
CAGR measures growth from a single initial investment to a final value. IRR (Internal Rate of Return) can handle multiple cash flows at different times. Use CAGR for simple investments; use IRR when there are contributions or withdrawals during the period.
How does CAGR differ from average annual return?
The simple average of yearly returns ignores compounding. CAGR accounts for compounding and gives the actual annualized growth rate. For example, returns of +25%, -20%, +25% average to 10%, but the CAGR is only 7.72%.
CAGR vs average annual return — which is better for evaluating investments?
CAGR is almost always better because it accounts for compounding effects. Average annual return is the arithmetic mean of yearly returns, which can be misleading for volatile investments. For example, a fund that returns +50% one year and -50% the next has a 0% average return but a CAGR of -13.4%.
What is a good CAGR for stock market investments?
The historical average CAGR of the S&P 500 is approximately 10% per year before inflation, or about 7% after inflation, over long periods. A CAGR of 8-12% over 10+ years is considered solid for stock investments. Always compare your CAGR to a relevant benchmark.
How to calculate CAGR step by step?
The CAGR formula is: ending value divided by beginning value, raised to the power of 1 divided by the number of years, minus 1. For example, if 10,000 USD grows to 15,000 USD over 3 years: CAGR = (15000/10000)^(1/3) - 1 = 14.47%.
What are the limitations of CAGR that investors should know?
CAGR smooths out volatility and does not reflect investment risk or year-to-year performance. It assumes a steady growth rate that rarely exists in reality. CAGR also does not account for additional deposits or withdrawals during the period. For cash flow analysis, IRR is more appropriate.
Can CAGR be used for business revenue growth analysis?
Yes, CAGR is widely used to measure business metrics like revenue growth, profit growth, user base growth, and market share expansion. For example, a company whose revenue grew from 1M to 2.5M over 5 years has a revenue CAGR of approximately 20.1%, indicating strong growth.