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CAGR Calculator

Calculate the compound annual growth rate of your investment.

What is it?

CAGR (Compound Annual Growth Rate) measures the average annual growth rate of an investment over a specific period, assuming profits are reinvested every year. It is one of the most widely used metrics for evaluating investment performance.

Formula

CAGR = ((Final Value / Initial Value) ^ (1 / Years) − 1) × 100

Formula Explanation

CAGR finds the single constant annual growth rate that would take your initial value to your final value over the given number of years, smoothing out any year-to-year fluctuations into one steady, comparable figure — even though real investments rarely grow at a perfectly constant rate every year.

Example Calculation

An investment growing from $200,000 to $500,000 over 5 years has a CAGR of about 20.1% per year.

How to Use

  1. Enter the initial value of your investment.
  2. Enter the final (current) value of your investment.
  3. Enter the number of years between the two values.
  4. View the compound annual growth rate as a percentage.

Benefits

  • Converts an uneven, real-world growth path into one comparable annual rate.
  • The standard metric used to compare investment or business performance over time.
  • Simple to calculate with just a start value, end value, and time period.

Use Cases

  • Comparing the historical performance of a stock, fund, or portfolio.
  • Evaluating a business's revenue or profit growth over several years.
  • Benchmarking an investment's actual performance against a target rate.

What Your Result Means

CAGR represents the smoothed, constant annual growth rate that connects your starting and ending values. It does not reflect the actual volatility along the way — a volatile investment and a steady one can have the same CAGR despite very different year-to-year experiences.

Tips

  • Use CAGR to compare investments consistently, since it neutralizes the effect of when gains or losses happened.
  • Remember CAGR smooths out volatility — two investments with identical CAGR can have very different risk profiles.
  • A CAGR above roughly 12% is often considered strong for long-term equity investments, though this varies by market conditions.

Common Mistakes

  • Assuming CAGR reflects the actual year-by-year return path, when it's only a smoothed average.
  • Comparing CAGR figures calculated over different time periods without noting the difference.
  • Using CAGR alone without considering volatility or risk when comparing investments.

FAQs

What is a good CAGR?

Generally, a CAGR above 12% is considered strong for equity investments over the long term, though this varies by asset class and market conditions.

Is CAGR the same as annual return?

No. CAGR smooths out yearly fluctuations and shows a single, consistent annual growth rate rather than the actual year-by-year returns.

Can CAGR be used for mutual funds?

Yes. CAGR is commonly used to compare mutual fund, stock, and portfolio performance over multi-year periods.

How is CAGR different from the SIP Return calculator's return percentage?

CAGR gives an annualized rate, while the SIP Return calculator's percentage shows total cumulative profit relative to total invested — useful for different comparison purposes.

Can CAGR be negative?

Yes, if the final value is lower than the initial value, CAGR will be negative, reflecting an average annual decline.

This calculator provides estimates for informational purposes only and does not constitute investment advice.

Last updated: July 25, 2026