CAGR Calculator — Compound Annual Growth Rate
Calculate CAGR for any investment, business revenue, or portfolio. Compare against benchmarks to see if your investment is outperforming.
Solve For
CAGR
9.60%
CAGR
9.60%
Start Value
$10,000
Final Value
$25,000
Total Return
150.0%
Growth Projection
Benchmark Comparison
Long-run historical averages for orientation, not forecasts or current yields.
Analysis & insights
$10,000 grew to $25,000 over 10.0 years — a compound annual growth rate of 9.6%. Total return: 150.0%. Above inflation, but below long-term equity returns. Appropriate for shorter horizons or lower-risk asset classes.
Market-rate return
9.6% CAGR is consistent with the long-term S&P 500 average (~10%).
Risk & benchmark gauge
Current band
Market range
9.6% CAGR
Industry benchmarks
- Your CAGR9.6%
- US inflation (long-term)~3%
- High-yield savings4-5%
- S&P 500 long-term~10%
- Years held10
- Total return150.0%
Key insights
CAGR = "smoothed" growth
CAGR pretends every year had the same return. Real-world results bounce around year-to-year — same CAGR can have wildly different volatility. Use CAGR to compare returns; use standard deviation to compare risk.
Always compare CAGR to risk-free + benchmark
A 6% CAGR sounds OK until you remember the risk-free rate (Treasuries) was 5% and the S&P returned 10%. CAGR alone is meaningless without context.
Recommended actions(3)
Subtract fees, taxes, and inflation
High priorityNominal CAGR overstates your real return. A 10% nominal CAGR with 1% fees + 24% capital gains tax + 3% inflation = ~3.5% real return. Big difference.
Use CAGR to compare similar-period investments
Medium priorityCAGR comparisons are meaningful only when timeframes are equal. A 5-year CAGR can't be compared to a 1-year CAGR.
For projections, use conservative assumptions
Medium priorityFor retirement planning, use 5-7% real (after-inflation) return rather than nominal 10%. Conservative inputs → conservative results → no surprises.
Related Calculators
This tool is for educational purposes only and does not constitute financial, tax, or investment advice. Consult a qualified financial professional for advice specific to your situation.
What is Compound Annual Growth Rate?
CAGR is the constant annual rate that would take you from a starting value to an ending value over a given period. It is a smoothed rate: it describes the journey as if growth had been perfectly steady, which it almost never was.
That smoothing is both its value and its limitation. It makes two investments with wildly different paths directly comparable, and it hides everything about how bumpy each ride was.
The reason CAGR exists at all is that averaging annual returns gives the wrong answer. An investment that gains 50% then loses 50% has an average return of 0% and has actually lost 25% of its value. CAGR reports the −13.4% that reflects reality.
The formula — how to calculate Compound Annual Growth Rate
- Ending ÷ Beginning
- = the total growth multiple — 2.5 means the money became two and a half times as much
- 1 ÷ Years
- = the root that spreads that multiple evenly across the period
- − 1
- = converts the growth factor into a rate; 1.096 becomes 9.6%
CAGR needs only three inputs and ignores everything in between. Two investments with identical endpoints have identical CAGR however differently they got there.
Step-by-step example
- 01An investment grows from $10,000 to $25,000 over 10 years.
- 02Growth multiple: 25,000 ÷ 10,000 = 2.5.
- 03Tenth root: 2.5^0.1 = 1.09596.
- 04CAGR: 1.09596 − 1 = 9.60% a year.
- 05Check it: 10,000 × 1.096^10 = $24,999. Correct.
- 06Note what the total return figure would have told you instead: 150% over ten years. True, and much harder to compare against anything. The 9.6% can be set against a savings rate, a bond yield, or another investment over a different period.
- 07And the trap the smoothing hides: this same 9.6% CAGR describes a steady grind and a portfolio that tripled in year one then drifted down for nine years. Same endpoints, same CAGR, entirely different experience.
Why the arithmetic average is wrong
The single most useful thing CAGR does is correct a mistake that is very easy to make.
Take returns of +50% and −50% in successive years. The arithmetic average is zero. But $100 becomes $150, then $75 — a real loss of 25%. The CAGR is (75/100)^(1/2) − 1 = −13.4%, which is the number that describes what happened.
The reason is that returns multiply rather than add. A 50% loss requires a 100% gain to recover from, not another 50%. Averaging treats them as symmetric when they are not.
This asymmetry is why volatility itself reduces long-run returns, quite apart from any effect on risk. Two portfolios with the same average annual return will end up at different values if one is more volatile — the more volatile one ends lower. The gap between the arithmetic average and the CAGR is sometimes called volatility drag.
For a fund with a 10% average annual return and high volatility, the CAGR might be 8%. Both figures are true. Only the CAGR tells you what your money did.
Check which figure a fund is quoting
Marketing material sometimes quotes average annual return, which is the flattering one, rather than annualised or compound return, which is the honest one. In the US, standardised performance reporting requires annualised figures — but a chart or a headline in a brochure may not follow the same rule. If a document shows both and they differ, the difference is telling you how volatile the fund has been.
What CAGR cannot tell you
The smoothing that makes CAGR useful also makes it silent about several things that matter.
It says nothing about volatility. An investment that went up steadily and one that halved in the middle can have the same CAGR. If you would have sold at the bottom, those are not the same investment.
It is highly sensitive to the endpoints. Measure the S&P 500 from the peak in 2007 and you get one number; from the trough in 2009 you get a very different one. Any CAGR quoted over a period someone else chose deserves scepticism about why that period.
It ignores cash flows entirely. If you added or withdrew money along the way, the formula is simply wrong — it attributes your deposits to investment performance. What you want then is a money-weighted return, which is an internal rate of return calculation.
It says nothing about risk, taxes, fees or liquidity. A 12% CAGR on an illiquid private investment is not comparable to 12% on an index fund, and after-tax outcomes can differ substantially from pre-tax ones.
- CAGR —
- time-weighted; measures the investment, and ignores when you put money in.
- IRR (money-weighted) —
- accounts for the size and timing of every cash flow; measures your outcome rather than the investment's.
- Total return —
- the cumulative percentage over the whole period, not annualised. 150% over ten years.
- Annualised return —
- usually a synonym for CAGR in fund reporting.
- Real return —
- the CAGR minus inflation. A 7% nominal CAGR with 3% inflation is about 3.9% real, not 4% — the correct calculation divides rather than subtracts.
Rearranging it for the other two questions
The same equation answers three different questions depending on which term you solve for, and the other two are often more useful than the CAGR itself.
Solving for the ending value projects forward: what will $10,000 become at 8% over 20 years? The answer is $46,610. This is the standard compounding question.
Solving for time answers the goal question: how long until $10,000 becomes $50,000 at 8%? That is ln(5) ÷ ln(1.08) = 20.9 years. This is the version most useful for planning, because time is usually the variable you have least control over.
Two edge cases are worth naming because they break the formula rather than merely stretching it. At a growth rate of exactly zero, the denominator ln(1) is zero and the time is undefined — the target is simply never reached. And a target below the starting value with a positive rate gives a negative time, which means the condition is already satisfied rather than that time runs backwards.
Reference points for judging a CAGR
The practical use of these reference points is not to predict but to sanity-check. A private investment promising a 25% CAGR is claiming to more than double the long-run return of the stock market, sustainably. That is not impossible, and it is a claim that should be interrogated rather than accepted.
Long-run annualised returns
| Asset | Rough long-run CAGR | Caveat |
|---|---|---|
| US large-cap stocks | ~10% nominal | About 7% after inflation; enormous variation by period |
| Investment-grade bonds | ~5% nominal | Highly dependent on the starting yield |
| Cash and savings | ~3% nominal | Frequently negative in real terms |
| US housing | ~4% nominal | Before maintenance, tax and transaction costs |
| Inflation | ~3% | The hurdle every other figure has to clear |
These are century-scale averages and should not be read as forecasts. Any twenty-year window can look very different — the S&P 500 returned close to nothing over the decade from 2000 to 2009.
Common mistakes to avoid
- Averaging annual returns instead of compounding them. +50% then −50% is not 0%.
- Applying CAGR to an investment with deposits or withdrawals. Use IRR instead.
- Accepting a CAGR over a period chosen by whoever is selling the investment.
- Comparing a nominal CAGR against a real one, or against a return with different tax treatment.
- Treating CAGR as a forecast rather than a description of what already happened.
- Reading a smooth CAGR as evidence of a smooth ride.
Frequently asked questions
Sources & references
Written and fact-checked by the CalcProLabs Editorial Team. Read our calculation methodology and editorial policy.
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