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CAGR Calculator
Find the compound annual growth rate of an investment. Enter the initial value, final value and number of years, then press Calculate.
Written by TopicDrill Editorial Team·Updated June 2026
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How CAGR works
CAGR answers a simple question: if your investment had grown at one steady rate every year, what would that rate be? It takes the beginning value, the ending value and the number of years, then finds the constant annual rate that links them. That makes it a clean way to compare investments that grew over different lengths of time.
The formula is CAGR = (ending value / beginning value)1/years - 1. For example, if $10,000 grows into $25,000 over 5 years, the calculation is (25,000 / 10,000) raised to the power of one fifth, minus one, which works out to roughly 20.1% per year.
CAGR vs simple average
Suppose an investment gains 50% one year and loses 30% the next. The simple average looks like a 10% return, but the real annualized result is different because the loss applies to a larger base. CAGR captures that compounding effect, so it reflects what actually happened to your money rather than an arithmetic shortcut.
Things to keep in mind
CAGR only uses the first and last values, so it hides the volatility in between and assumes no money was added or withdrawn along the way. Treat it as a comparison metric, not a risk measure. For broad investor education see Investor.gov from the SEC, or explore our other financial calculators to plan and compare returns.
Frequently asked questions
What is CAGR?
CAGR, or compound annual growth rate, is the single constant yearly rate that would grow an investment from its starting value to its ending value over a given period. It smooths out the ups and downs into one annualized figure that is easy to compare across investments.
What is the CAGR formula?
The formula is CAGR = (ending value / beginning value)^(1 / years) - 1, expressed as a percentage. For example, growing $10,000 into $25,000 over 5 years gives (25000 / 10000)^(1/5) - 1, which is about 20.1% per year.
How is CAGR different from average return?
A simple average just adds up the yearly returns and divides by the number of years, which ignores compounding and can be misleading. CAGR accounts for compounding, so it reflects the actual annualized rate that connects the start and end values.
What are the limits of CAGR?
CAGR assumes smooth, steady growth and only looks at the first and last values, so it hides the volatility in between. It also ignores any deposits or withdrawals made along the way. Use it as a comparison tool, not a complete picture of risk.
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