How the cagr calculator works
CAGR expresses growth that happened unevenly year to year as a single smoothed annual rate:
CAGR = (Final value / Initial value)1/t − 1
Where t is the number of years between the two values. The result is expressed as a percentage.
Step-by-step guide
- Enter the starting (initial) investment value.
- Enter the ending (final) value.
- Set the number of years between the two values.
- Read the CAGR — the constant annual rate that would produce the same overall growth.
Where CAGR is commonly used
CAGR is widely used to compare the historical performance of mutual funds, stocks, or business revenue over multi-year periods, because it reduces a messy year-by-year series into one comparable number.
Frequently asked questions
A simple average of yearly returns can be misleading because it ignores compounding and can be skewed by one unusually good or bad year. CAGR instead calculates the single steady rate that would take you from the initial to the final value, which better reflects actual compounded growth.
Yes — if the final value is lower than the initial value, CAGR will be negative, indicating an average annual decline over the period.
No — CAGR only looks at the start and end points, smoothing over any ups and downs in between. Two investments with identical CAGR can have had very different (and differently risky) paths to get there.