CAGR Calculator
A CAGR calculator finds the compound annual growth rate: the single steady rate that would carry an investment from its starting value to its ending value over a given number of years. It answers a question a total return figure cannot. Doubling your money is impressive over three years and unremarkable over thirty, and CAGR is what makes those two outcomes directly comparable by expressing both as a per-year rate. The calculation is a geometric mean rather than a simple average, which means it accounts for compounding: growth in year one becomes the base for year two. This tool computes CAGR alongside the absolute total return so you can see both the annualised rate and the raw percentage change. It runs entirely in your browser. What CAGR deliberately hides, and the situations where using it produces a wrong answer, are covered in detail below.
How to Use the CAGR Calculator - Step by Step
- Enter "Initial Value ($)" - the value at the start of the period. For an investment this is the amount you put in, including any purchase costs, at a single point in time. For business revenue it is the figure for the first year of the period you are measuring. The default is 10,000. This must be the value at the beginning, not an average.
- Enter "Final Value ($)" - the value at the end of the period. For an investment held to today, this is its current market value. For one that was sold, use the net proceeds after selling costs. For revenue, use the most recent full year. The default is 25,000.
- Enter "Time Horizon (Years)" - the number of years between the two values, which can be a decimal such as 2.5 for thirty months. Count the elapsed time, not the number of data points: revenue for 2020 through 2025 is six figures but five years of growth. Getting this wrong by one year is the most common input error and it moves the result substantially.
- Click "Calculate CAGR" - the tool applies the geometric mean and returns both outputs immediately.
- Read the "CAGR" figure - the large percentage is the steady annual rate that would produce your ending value from your starting value. It appears in green for positive growth and red for a loss. With the default values of 10,000 to 25,000 over 5 years, CAGR is 20.11 percent.
- Read the "Absolute Total Return" - the raw percentage change from start to finish, with no adjustment for time. The defaults give 150 percent. Comparing the two figures shows what annualising does: 150 percent total becomes 20.11 percent per year across five years.
- Compare investments by running each one separately - this is the main use. Enter one investment, note its CAGR, then enter another. A property held twelve years and a fund held four become directly comparable once both are expressed as annual rates, which their total returns cannot do.
- Sanity check against the rule of 72 - divide 72 by your CAGR to estimate the years needed to double. At 8 percent that gives 9 years, and the exact figure is 9.01. If the rule of 72 answer is wildly different from your holding period intuition, one of your inputs is probably wrong.
The CAGR Formula Explained
The value at the start of the period, as a single lump sum committed at one point in time. Include acquisition costs where they apply.
The value at the end of the period. Use net proceeds if the asset was sold, and current market value if it is still held.
Elapsed years between the two values. Decimals are allowed, so thirty months is entered as 2.5. Count elapsed time, not the number of annual data points.
CAGR is a geometric mean, and the distinction from an arithmetic mean is the whole reason it exists. Take an investment that gains 100 percent in year one and loses 50 percent in year two. The arithmetic mean of those returns is (100 - 50) / 2 = 25 percent per year, which suggests solid performance. In reality 10,000 became 20,000 and then fell back to 10,000, and the CAGR is exactly 0 percent. The arithmetic mean is not merely imprecise here, it is wrong in a way that always flatters. The gap is called volatility drag and it grows with volatility. A milder sequence of plus 30, minus 20, plus 15 percent has an arithmetic mean of 8.33 percent per year but a CAGR of 6.15 percent, a drag of 2.19 percentage points. The exponent 1 / n is what performs the annualisation: it asks what constant rate, compounded n times, produces the observed total growth. Two limitations follow directly from the formula. It uses only the first and last values, so everything in between is invisible: two investments with identical CAGR can have had entirely different journeys, one steady and one terrifying. And it assumes a single lump sum with no money added or withdrawn, which makes it invalid for a portfolio receiving regular contributions.
CAGR Calculator - Worked Examples with Real Numbers
Example 1 - Index Fund Held Seven Years
An investor puts 10,000 into a broad market index fund and it is worth 18,000 seven years later. Absolute return is (18,000 - 10,000) / 10,000 = 80 percent. CAGR is (18,000 / 10,000)^(1/7) - 1 = 1.8^0.142857 - 1 = 0.0876, or 8.76 percent per year. The 80 percent headline sounds better than 8.76, but the annual figure is the one that can be compared against a savings account, a bond, or a different fund held for a different length of time.
Initial Value: $10,000 - Final Value: $18,000 - Time Horizon: 7 years
CAGR: 8.76% - Absolute Total Return: 80.00%
Example 2 - Business Revenue Growth
A company grows annual revenue from 50,000 to 250,000 over five years. Absolute growth is 400 percent. CAGR is (250,000 / 50,000)^(1/5) - 1 = 5^0.2 - 1 = 0.3797, or 37.97 percent per year. This is the figure to quote to an investor, because it is comparable against the growth rate of any other company regardless of the period measured. Note the compounding: 37.97 percent per year for five years multiplies revenue fivefold, not by 2.9 as adding 37.97 five times would suggest.
Initial Value: $50,000 - Final Value: $250,000 - Time Horizon: 5 years
CAGR: 37.97% - Absolute Total Return: 400.00%
Example 3 - Property Held Twelve Years
A house bought for 300,000 sells for 450,000 twelve years later. The 150,000 gain looks substantial and the absolute return is 50 percent. CAGR is (450,000 / 300,000)^(1/12) - 1 = 1.5^0.083333 - 1 = 0.0344, or 3.44 percent per year. Over the same twelve years an index fund returning 8 percent would have turned 300,000 into roughly 755,000. This is why property returns should always be annualised before being compared to anything else, and why a large-sounding gain over a long period can represent modest performance.
Initial Value: $300,000 - Final Value: $450,000 - Time Horizon: 12 years
CAGR: 3.44% - Absolute Total Return: 50.00%
Who Uses the CAGR Calculator?
Investors Comparing Holdings
Converting the total returns of assets held for different lengths of time into a common annual rate, so that a fund held for four years and a property held for twelve can be judged against each other and against a benchmark index on the same basis.
Founders and Business Owners
Reporting revenue, user, or customer growth as a single annual rate for investor updates and board decks, where a multi-year total is less informative than the compound rate, and where the rate is what gets compared against sector benchmarks.
Analysts Building Projections
Establishing the historical growth rate of a market, product line, or cost base as the input to a forward projection, while recognising that a past CAGR is a description of what happened rather than a forecast of what will.
Anyone Assessing a Long-Held Asset
Working out whether a house, a pension, or an inherited holding actually grew at a reasonable rate once the holding period is accounted for, since a gain that sounds large in absolute terms is often modest when spread across fifteen or twenty years.
Common CAGR Mistakes to Avoid
This is the most consequential error and it is very common. Someone who invested 500 a month for ten years and now has 100,000 cannot use CAGR to find their return. Entering the first year of deposits as the start value gives an absurd 32.49 percent. Entering the 60,000 total contributed gives 5.24 percent, which ignores that later deposits had far less time to compound. Neither is the real return. CAGR assumes one lump sum at the start and nothing added afterwards. For a portfolio with ongoing contributions the correct measure is a money-weighted return, calculated with IRR or the XIRR function in any spreadsheet.
Revenue figures for 2020 through 2025 comprise six annual data points but represent five years of growth. Entering 6 instead of 5 understates the growth rate, and on a business growing quickly the difference is material. On the 50,000 to 250,000 example, five years gives 37.97 percent while six years gives 30.77 percent, a gap of over seven percentage points from a single input error. Count the elapsed time between the two values, not the number of figures in the series.
CAGR is a smoothed figure derived from two data points. An investment that fell 40 percent in the middle of the period and one that rose steadily throughout can produce the identical CAGR. Someone using that number to judge whether they could tolerate the investment is being given no information about the volatility they would have had to sit through. CAGR describes the outcome, not the experience, and it says nothing at all about risk.
A nominal 8 percent CAGR during a period of 3 percent annual inflation does not give a 5 percent real return. The correct calculation divides rather than subtracts: (1.08 / 1.03) - 1 = 4.85 percent. The difference is small at these rates and grows as both figures rise. This calculator returns nominal figures, so any comparison of purchasing power over a long period needs this adjustment applied afterwards.
The CAGR Required to Turn $100,000 into $1,000,000
Every row represents the same 900 percent total return. What changes is the time allowed, and the effect on the annual rate required is dramatic. This is the clearest demonstration of why total return figures cannot be compared without annualising them first.
| Time Horizon | Total Return | Required CAGR | Realistic Source |
|---|---|---|---|
| 5 years | 900% | 58.49% | Speculative, rarely sustained |
| 10 years | 900% | 25.89% | Exceptional growth investing |
| 15 years | 900% | 16.59% | Strong active performance |
| 20 years | 900% | 12.20% | Above long-run equity average |
| 30 years | 900% | 7.98% | Broad market index fund |
| 40 years | 900% | 5.93% | Conservative balanced portfolio |
Verification. All rows use the same start and end values, so total return is fixed at (1,000,000 - 100,000) / 100,000 = 900 percent. Ten years: (1,000,000 / 100,000)^(1/10) - 1 = 10^0.1 - 1 = 1.25893 - 1 = 25.89 percent. Confirmed. Twenty years: 10^0.05 - 1 = 1.12202 - 1 = 12.20 percent. Confirmed. Thirty years: 10^0.033333 - 1 = 1.07978 - 1 = 7.98 percent. Confirmed. Forty years: 10^0.025 - 1 = 1.05925 - 1 = 5.93 percent. Confirmed. Note that the required rate does not halve when the time doubles, because compounding is exponential: twice the time needs far less than half the rate.
Frequently Asked Questions
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