Compound Annual Growth Rate (CAGR) Calculator
Find the compound annual growth rate that turns a starting value into an ending value over a set number of years.
Recent
Formula
How the calculation works
CAGR asks what single steady yearly rate would take the starting value to the ending value in exactly the number of years you set.
The calculator divides the ending value by the beginning value, takes that ratio to the power of one over the years, and subtracts one.
The separate total return is simply the whole growth as a percentage, which is always higher than the CAGR when the period is longer than a year.
Common mistakes
- Treating CAGR as the return you actually earned each year, when real yearly returns swing far above and below that smooth figure.
- Comparing a CAGR over three years with one over ten, because a shorter period hides how much a single good or bad year distorts the rate.
When to use it
- Use it to compare two investments held for different lengths of time, since CAGR puts both on the same yearly footing.
- Do not use it alone for a fund that pays dividends or has extra contributions, because those cash flows are not part of the price based CAGR.
Worked example
A value growing from 185000 to 342000 over 7 years has a CAGR of about 9.17 percent, while the total return is about 84.86 percent.
Common questions
How is CAGR different from the total return?
Total return shows the whole gain as one number, while CAGR spreads it into a steady yearly rate that ignores the bumps along the way.
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