What is CAGR?
Compound annual growth rate — the one steady yearly rate that would carry your starting value to your ending value over the period. It smooths out the bumpy real path into a single, comparable growth figure.
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CAGR Calculator
Compound annual growth rate — the single yearly rate that links a start and end value.
CAGR = (End / Begin)^(1/n) − 1
Frequently asked questions
How is CAGR calculated?
Divide the ending value by the beginning value, take the n-th root (where n is the number of years), then subtract 1. Grow $10,000 to $16,000 over 4 years and the CAGR is (16000/10000)^(1/4) − 1, about 12.5% a year.
How is CAGR different from a simple average return?
A simple average just adds the yearly returns and divides, ignoring compounding and overstating volatile results. CAGR accounts for the fact that each year builds on the last, so it reflects what your money actually did.
How do I read the chart?
The curve is the smooth path your investment would trace if it grew at exactly the CAGR every single year. The first and last points are pinned to your real start and end values; the bend between them shows compounding doing its work.
Where is this used in real life?
Funds and shares — comparing a fund that returned 60% over 5 years (about 9.9% CAGR) against one that returned 50% over 3 years (about 14.5% CAGR). Business — measuring revenue growth across years. Property — annualising a multi-year gain. It is the fairest way to rank investments held for different lengths of time.