CAGR Calculator
Investment Calculator
CAGR (Compound Annual Growth Rate) is the single best metric for comparing investment performance across different time periods and asset classes. Unlike simple averages that ignore compounding, CAGR shows the steady annualized rate that would produce the same final value—cutting through volatility to reveal true returns.
What This Calculator Does
- Calculate exact CAGR between any two values and dates
- Compare multiple investments using standardized annual return
- Reverse-calculate required CAGR to reach a target goal
- Visualize compounding growth vs linear (simple) growth
- Apply CAGR to business revenue, GDP, and population growth
Frequently Asked Questions
What is CAGR and how is it calculated?
CAGR = (Ending Value / Beginning Value)^(1/Years) - 1. For example, if $10,000 grew to $18,000 over 8 years, CAGR = (18,000/10,000)^(1/8) - 1 = 7.6% annually. This smooths out year-to-year volatility to show the equivalent steady annual growth rate.
What is a good CAGR for investments?
The S&P 500 has delivered a historical CAGR of about 10% (7% inflation-adjusted) over the long term. A 7–10% CAGR is considered solid for broad stock market investments. Individual stocks can vary wildly. For business revenue growth, 15–25% CAGR is strong.
What is the difference between CAGR and average annual return?
Average annual return simply averages yearly returns: +50% and -33% averages 8.5%. But CAGR correctly shows 0%—you start with $100, it goes to $150, then falls back to $100. CAGR accounts for compounding and volatility drag; average return does not.
How does CAGR relate to the Rule of 72?
The Rule of 72 is a quick application of CAGR: divide 72 by the CAGR to estimate years to double. At 7.2% CAGR, money doubles in 10 years. At 9% CAGR, it doubles in 8 years. CAGR is the basis for this mental shortcut.
What is the limitation of CAGR?
CAGR presents a smooth hypothetical return and hides volatility. Two investments with identical CAGR can have dramatically different risk profiles—one might be smooth, another with wild swings. Always consider volatility (standard deviation) and maximum drawdown alongside CAGR.
How do I use CAGR to set investment goals?
Reverse-engineer your goal: if you need $500,000 in 15 years and have $100,000 today, you need a CAGR of (500,000/100,000)^(1/15) - 1 = 11.3%. If that seems unrealistic, adjust contributions or extend timeline. Our calculator handles this reverse calculation automatically.