CAGR Calculator
Calculate the compound annual growth rate of your investment.
What is the CAGR Calculator?
The Compound Annual Growth Rate (CAGR) is one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time. It represents the mean annual growth rate of an investment over a specified period of time longer than one year, assuming the investment compounds over that period.
Unlike average annual return, CAGR smooths out the growth rate, ignoring short-term fluctuations and volatility, to give you a single constant rate that describes how an investment would have grown if it grew at a steady rate.
Practical Examples & Reference Guide
Here is a table demonstrating the CAGR calculated for various investment scenarios:
| Initial Value (Beginning) | Final Value (Ending) | Time Horizon (Years) | Calculated CAGR (%) |
|---|---|---|---|
| $1,000 | $2,500 | 5 Years | 20.11% |
| $10,000 | $15,000 | 3 Years | 14.47% |
| $5,000 | $12,000 | 10 Years | 9.15% |
| $50,000 | $40,000 | 5 Years | -4.36% |
These examples illustrate that CAGR can measure both growth and decline (negative CAGR).
In-Depth Technical Guide
How to Calculate CAGR (The Formula)
To calculate the Compound Annual Growth Rate manually, use the following formula:
$$CAGR = \left(\frac{Ending\ Value}{Beginning\ Value}\right)^{\frac{1}{n}} - 1$$
Where:
- Ending Value (EV) = the value of the investment at the end of the period
- Beginning Value (BV) = the value of the investment at the start of the period
- n = the number of years (or compounding periods)
Step-by-Step CAGR Calculation Example
Imagine you buy a stock in 2020 for $1,000 (Beginning Value) and sell it in 2025 for $2,000 (Ending Value). The duration is 5 years (n = 5).
- Divide the Ending Value by the Beginning Value: $2,000 / $1,000 = 2
- Raise the result to the power of 1/n (1/5 or 0.20): $2^{0.20} \approx 1.1487$
- Subtract 1: $1.1487 - 1 = 0.1487$
- Multiply by 100 to get a percentage: 14.87%
This means your investment grew at a compound annual rate of 14.87% per year.