CAGR (Compound Annual Growth Rate) is the annualized rate at which an investment grows from its beginning value to its ending value, assuming profits are reinvested each year. It smooths out volatility to give a single representative annual growth rate.

How is CAGR calculated?

CAGR = (Ending Value / Beginning Value)^(1 / Years) − 1. For example, if $10,000 grew to $18,000 in 5 years: CAGR = (18000/10000)^(1/5) − 1 = 1.8^0.2 − 1 ≈ 12.47% per year.

It depends on the context. S&P 500 historical CAGR is roughly 10% per year. A CAGR of 15–20% for a growth stock or business is considered strong. For inflation-adjusted real returns, 7% is often cited as the historical stock market average.

What is the difference between CAGR and average annual return?

Average annual return adds up annual returns and divides by years — it can overstate results because it ignores compounding. CAGR reflects the actual geometric mean, showing the true annualized rate. CAGR will always be equal to or lower than the simple average.

Can CAGR be used for non-investment metrics?

Yes — CAGR applies to any metric that grows over time: revenue, users, subscribers, market share, or any KPI. It's widely used in business analysis to benchmark and compare growth rates across different periods.

CAGR Calculator

Calculate the Compound Annual Growth Rate (CAGR) for any investment, business metric, or portfolio. Enter the beginning value, ending value, and number of years to find the true annualized growth rate with a year-by-year value table.

CAGR Results

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What Is CAGR?

CAGR stands for Compound Annual Growth Rate. It's the rate at which an investment would have grown each year if it grew at a steady, compounded rate — from the beginning value to the ending value over a specified period.

The formula is: CAGR = (Ending Value / Beginning Value)^1/Years − 1

CAGR is useful because real investments don't grow at the same rate every year. CAGR gives you a single, comparable number to evaluate performance across different periods and assets.

CAGR vs. Average Annual Return

Average annual return is the simple arithmetic mean of annual returns. CAGR is the geometric mean — it accounts for compounding and will always be equal to or lower than the simple average. CAGR is the more accurate measure of investment performance over time.

Common Benchmarks

S&P 500: ~10% nominal CAGR historically (~7% inflation-adjusted)
Bonds (10-yr Treasury): ~3–4% over long periods
Savings accounts: 4–5% (current high-yield rates)
Real estate: ~4–6% nationally on average