Compound Annual Growth Rate (CAGR) Calculator
Calculate the compound annual growth rate (CAGR) of any investment to understand its true yearly growth and compare performance across different time periods.
Calculate your Compound Annual Growth Rate (CAGR)
Compound Annual Growth Rate (CAGR) results:
14.87
Compound Annual Growth Rate (CAGR) Explained 📈
CAGR represents the average annual growth rate of an investment over a specific period of time, assuming profits are reinvested each year.
It smooths out returns to show consistent year-over-year growth, even if actual returns fluctuate.
CAGR is commonly used for evaluating stocks, funds, portfolios, business revenue, and long-term investments.
Key Facts
- CAGR is expressed as an annual percentage rate.
- It assumes reinvestment and steady growth, even if actual returns vary year to year.
- CAGR does not reflect risk, volatility, or interim losses.
- It is best used for long-term performance evaluation rather than short-term analysis.
- CAGR is commonly used in finance, investing, and business forecasting.
Formulas
- CAGR Formula
CAGR (%) = (Final Value ÷ Initial Value)^(1 ÷ Number of Years) − 1 × 100- Calculates the annualized growth rate of an investment over a specific time period.
CAGR Examples
- Invest $1,000, grow to $2,000 in 5 years → CAGR ≈ 14.87%
- Portfolio grows from $10,000 to $15,000 in 3 years → CAGR ≈ 14.47%
- Business revenue grows from $500,000 to $750,000 over 4 years → CAGR ≈ 10.67%
FAQs
What does CAGR tell me?
CAGR shows the average annual growth rate of an investment over time, assuming steady compounding.
Is CAGR the same as ROI?
No. ROI measures total return, while CAGR annualizes that return over time to show consistent yearly growth.
Does CAGR account for volatility?
No. CAGR smooths returns and does not reflect year-to-year fluctuations or risk.
Can CAGR be negative?
Yes. A negative CAGR indicates an investment has decreased in value over time.
When should I use CAGR instead of ROI?
Use CAGR when comparing investments held over different time periods or when evaluating long-term growth.