How is CAGR calculated?

CAGR is calculated using the formula: CAGR = (Ending Value ÷ Beginning Value)^(1 ÷ Years) − 1. For example, if $10,000 grows to $20,000 in 5 years, CAGR = (20,000 ÷ 10,000)^(1 ÷ 5) − 1 = (2)^0.2 − 1 = 14.87% per year.

Why is CAGR better than simple average annual return?

Simple arithmetic average annual returns create false impressions when returns are volatile. If an asset gains 100% in Year 1 and drops 50% in Year 2, the arithmetic average return is (100% − 50%) ÷ 2 = +25% per year, even though your actual capital returned to zero net gain ($100 → $200 → $100). CAGR accurately reports 0% compound growth, reflecting your real wealth.

What is the Rule of 72 in relation to CAGR?

The Rule of 72 is a mental shortcut to estimate how many years it will take to double an investment at a given compound annual growth rate: Years to Double ≈ 72 ÷ CAGR (%). For example, at an 8% CAGR, your portfolio will double in approximately 72 ÷ 8 = 9.0 years.

CAGR Calculator – Compound Annual Growth Rate

Q: What is Compound Annual Growth Rate (CAGR)?

Compound Annual Growth Rate (CAGR) is the constant annual rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming profits were reinvested at the end of each period of the investment's lifespan.

Calculate the Compound Annual Growth Rate (CAGR) of an investment portfolio, stock position, or business revenue. Determine total growth percentages, investment multiples, and Rule of 72 doubling timelines.

100% Free · Geometric Compounding Engine

Growth Parameters CAGR Engine

Calculation Mode Solve for

Beginning Value Initial amount / revenue

Ending Value Final balance / revenue

Target CAGR Rate Annual compound rate

Number of Years Investment duration

Years

Compound Annual Growth Rate (CAGR)

+20.11%

Compounded annually over 5 years

Beginning Value

$10,000

Initial capital

Ending Value

$25,000

Final portfolio balance

Total Dollar Growth

$15,000 (+150.0%)

Absolute capital gain

Growth Multiple

2.50x Initial

Ending ÷ Beginning

Rule of 72 Doubling Time

3.6 Years

72 ÷ CAGR

Simple Average Return

+30.00% / yr

Total return ÷ Years

Compound Growth Trajectory

Annual Trajectory

Compound Portfolio Trajectory

Starting Capital vs Compounded Gain

Final Composition

Starting Capital

Compounded Capital Gain

Year-by-Year Compound Growth

Year	Starting Balance	Annual Gain	Ending Balance	Cumulative Growth

What Is Compound Annual Growth Rate (CAGR)?

The Compound Annual Growth Rate (CAGR) is the geometric progression ratio that measures the constant annualized rate of return of an investment over a multi-year time horizon. It represents the smooth, steady rate at which an investment would have grown if it grew at a constant rate every single year and all annual profits were continuously reinvested.

In reality, investment markets rarely experience smooth, linear returns. A stock portfolio might surge 35% in one year, plummet 18% during a bear market the next, and recover 22% in year three. CAGR cuts through year-to-year volatility, providing business founders, investors, and analysts with a standardized annual benchmark.

CAGR = ( Ending Value ÷ Beginning Value )^(1 ÷ n) − 1

Ending Value: Final portfolio balance, company revenue, or asset price.

Beginning Value: Starting investment capital or initial metric.

n: Number of investment years (or fractional years).

CAGR vs. Arithmetic Average Annual Return: Why Averages Lie

Many financial brochures advertise the "Average Annual Return" of a fund. However, simple arithmetic averages can be profoundly misleading due to volatility drag.

Consider an investor who starts with $100,000:

Year 1: The portfolio gains +100% → Balance reaches $200,000.
Year 2: A market crash cuts the portfolio by −50% → Balance drops back to $100,000.

If you calculate the arithmetic average annual return: (+100% − 50%) ÷ 2 = +25.0% per year! A mutual fund salesperson might claim the fund averaged 25% annual returns. But your actual net profit after two years was exactly $0.

When calculated using the CAGR formula: ($100,000 ÷ $100,000)^1/2 − 1 = 0.00% CAGR. CAGR accurately captures the real compounding reality of your money.

Common Applications of CAGR

Stock Market & Mutual Fund Portfolios: Comparing how an individual stock or ETF performed against benchmark indices like the S&P 500 or Nasdaq 100.
Startup & SaaS Revenue (ARR / MRR): Tracking Annual Recurring Revenue growth over 3 to 5 years to determine business valuation multiples.
Real Estate Appreciation: Evaluating the true annualized appreciation rate of a residential property after 10 or 20 years of ownership.
Economic & Industry Forecasting: Measuring the expansion rate of emerging industries (e.g. electric vehicles, artificial intelligence, cloud infrastructure).

The Rule of 72 & Doubling Time

A classic companion to CAGR is the Rule of 72. By dividing 72 by your CAGR percentage, you can immediately estimate how many years it will take for your capital to double:

Years to Double ≈ 72 ÷ CAGR

At 6% CAGR: 72 ÷ 6 = 12.0 years to double your portfolio.

At 8% CAGR: 72 ÷ 8 = 9.0 years to double your portfolio.

At 12% CAGR: 72 ÷ 12 = 6.0 years to double your portfolio.

Frequently Asked Questions About CAGR

What is a good CAGR for stock market investments?

Historically, the S&P 500 has produced a long-term CAGR of approximately 10% before inflation (or roughly 7% on an inflation-adjusted basis). Consistently achieving a CAGR above 10% to 12% over 10+ years is considered exceptional performance that outperforms the vast majority of professional hedge funds.

Can CAGR be negative?

Yes. If an investment ends with a value lower than the starting capital, the CAGR will be negative, representing the annualized compound rate of capital loss over the period.

What are the limitations of CAGR?

CAGR assumes steady, uninterrupted compounding and ignores interim market volatility. It only examines the start and end dates; if an asset experienced wild swings or had intermediate capital additions or withdrawals, CAGR will not reflect cash flow timing. For cash flow-intensive investments, Internal Rate of Return (IRR) or Money-Weighted Return is more suitable.

What is the difference between CAGR and IRR?

CAGR assumes a single lump sum invested at the start and held until the end with no additions or withdrawals. Internal Rate of Return (IRR) is a more complex calculation that accounts for multiple irregular cash inflows and outflows throughout the investment horizon.

How do I project future value using CAGR?

Use the formula: Ending Value = Beginning Value × (1 + CAGR)^Years. In our calculator, select "Project Ending Value" mode, input your initial capital and expected annual rate, and the tool will project your future balance and year-by-year trajectory table.

All 21 Calculators

CAGR Calculator – Compound Annual Growth Rate

Compound Growth Trajectory

Starting Capital vs Compounded Gain

Year-by-Year Compound Growth

What Is Compound Annual Growth Rate (CAGR)?

CAGR vs. Arithmetic Average Annual Return: Why Averages Lie

Common Applications of CAGR

The Rule of 72 & Doubling Time

Frequently Asked Questions About CAGR

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