# CAGR Calculator

Calculate the Compound Annual Growth Rate (CAGR) of any investment. Find the smoothed annual return between any two values over time. Free online tool.

## What this calculates

Calculate the Compound Annual Growth Rate of any investment or metric. CAGR tells you the smoothed annual rate of return as if growth happened at a steady pace, making it easy to compare investments with different time horizons.

## Inputs

- **Beginning Value** ($) — min 0.01 — The starting value of your investment.
- **Ending Value** ($) — min 0 — The final value of your investment.
- **Number of Years** — min 0.1, max 100 — The time period in years over which the growth occurred.

## Outputs

- **CAGR** — formatted as percentage — The Compound Annual Growth Rate.
- **Total Return** — formatted as percentage — The total percentage return over the entire period.
- **Absolute Gain** — formatted as currency — The total dollar amount gained or lost.

## Details

CAGR (Compound Annual Growth Rate) is one of the most widely used metrics in finance and business. The formula is CAGR = (Ending Value / Beginning Value)^(1/Number of Years) - 1. Unlike simple average returns, CAGR accounts for compounding and gives you the constant rate of return that would take the beginning value to the ending value over the given time period.

CAGR is particularly useful for comparing investments with different time horizons. For example, if Investment A grew from $10,000 to $18,000 in 4 years and Investment B grew from $10,000 to $30,000 in 7 years, the total returns (80% vs 200%) are misleading. CAGR reveals Investment A grew at 15.83% per year while Investment B grew at 16.99% per year, making the comparison meaningful.

It is important to understand that CAGR smooths out volatility. An investment might have had wild swings year to year but still show a steady CAGR. This makes it a useful summary metric but an incomplete picture of risk. Always consider CAGR alongside volatility metrics like standard deviation when evaluating investments.

## Frequently Asked Questions

**Q: What is CAGR?**

A: CAGR stands for Compound Annual Growth Rate. It represents the rate of return that would be required for an investment to grow from its beginning value to its ending value, assuming profits are reinvested at the end of each year. The formula is (Ending Value / Beginning Value)^(1/Years) - 1.

**Q: How is CAGR different from average annual return?**

A: Average annual return is the arithmetic mean of yearly returns, while CAGR is the geometric mean that accounts for compounding. For example, an investment that gains 50% in year one and loses 50% in year two has an average annual return of 0%, but a CAGR of -13.4% (since $100 becomes $150 then $75). CAGR more accurately reflects actual investment performance.

**Q: What is a good CAGR?**

A: A 'good' CAGR depends on context. The S&P 500 has historically returned about 10% CAGR (about 7% after inflation). For individual stocks, a CAGR above 15% is considered strong. For businesses, revenue CAGR above 20% indicates rapid growth. Always compare CAGR to relevant benchmarks and consider the risk involved.

**Q: What are the limitations of CAGR?**

A: CAGR does not account for investment risk or volatility. Two investments with the same CAGR may have very different risk profiles. CAGR also assumes constant growth, which rarely occurs in reality. It does not consider the timing of additional investments or withdrawals, and it can be misleading for very short or very long time periods.

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Source: https://vastcalc.com/calculators/finance/cagr
Category: Finance
Last updated: 2026-04-21