CAGR Calculator (Compound Annual Growth Rate)

What Is CAGR?

The Compound Annual Growth Rate (CAGR) is the rate at which an investment would have grown had it grown by the same percentage every single year, compounding as it went. It smooths the volatility of year-to-year returns into one comparable number.

The CAGR Formula

CAGR = (Ending Value / Beginning Value)^(1 / Number of Years) - 1

To find the future (ending) value when you know the CAGR:

Ending Value = Beginning Value × (1 + CAGR)^Years

CAGR vs. Average Annual Return

These are not the same, and the gap is not small. If a stock gains 100% one year and loses 50% the next, the average of those two returns is 25%. Your money did not grow 25% a year; you have exactly what you started with, and the CAGR is 0%. Any time someone quotes an “average annual return” without saying which average they mean, check.

The Rule of 72

A quick way to estimate how long it takes to double your money:

Years to Double ≈ 72 / CAGR (%)

At a 9% CAGR, your money doubles in roughly 8 years. At 12%, about 6. The shortcut is good enough for mental arithmetic between about 6% and 12%, and drifts outside that band: at 2% it says 36 years when the true answer is 35, and at 25% it says 2.9 when the true answer is 3.1. The calculator prints both the shortcut and the exact figure so you can see the size of the fudge.

Worked Example

A portfolio grew from $25,000 to $68,000 over 9 years: CAGR = ($68,000 / $25,000)^(1/9) - 1 = 11.76%

The portfolio grew at the equivalent of 11.76% per year, compounding. Note that the total gain over those nine years was 172%, which averages out to over 19% a year if you divide it by nine. That is the trap the section above is about, and it is why 172% and 11.76% describe the same portfolio.

CAGR Benchmarks

For reference, the S&P 500 has averaged roughly 10.5% CAGR over the long run (pre-inflation). Inflation averages around 3%, making the real CAGR about 7.5%.

Limitations

CAGR does not show the path. Two investments with the same CAGR can have wildly different risk profiles: one may have climbed steadily, the other crashed 70% mid-way and clawed it back. Pair CAGR with a volatility measure like standard deviation before comparing two managers on it.

It also ignores anything you added or took out along the way. If you put $25,000 in and then contributed $500 a month, the ending value reflects your deposits as much as the growth, and this calculator will credit all of it to the investment. For a portfolio with contributions you want a money-weighted return instead.