Return Rate / CAGR Calculator
Use this CAGR calculator to estimate the annualized growth rate of an investment, account balance, revenue figure, or other measurable value over time.
Last updated:
Results
- CAGR
- 8.15%
- Total return
- 60.00%
- Total gain/loss
- $3,000.00
Formula
CAGR = (Ending / Beginning)^(1/Years) − 1
How to calculate
- Divide the ending value by the beginning value.
- Raise the result to the power of 1 divided by the number of years.
- Subtract 1.
- Convert the answer into a percentage.
Worked example
From $5,000 to $8,000 in 6 years: CAGR = (8,000/5,000)^(1/6) − 1 ≈ 8.15%.
When CAGR is most useful
CAGR is useful when you want to summarize growth over multiple years as a single annualized rate. It helps compare investments, business revenue, account balances, and other values that change over time.
Because CAGR smooths the path between the beginning and ending value, it is often easier to compare than raw total return.
What CAGR does not show
CAGR does not reflect volatility. Two investments can have the same CAGR even if one had large swings and the other grew steadily. Use CAGR as a summary metric, not as a full picture of risk or year-by-year performance.
Frequently asked questions
What is CAGR?
CAGR is the annual growth rate that links a beginning value to an ending value over time.
How is CAGR different from average annual return?
Average annual return can ignore compounding, while CAGR reflects compounded growth.
Can CAGR be negative?
Yes. If the ending value is lower than the beginning value, CAGR will be negative.
Is CAGR useful for comparing investments?
Yes. It is often used to compare investments over different time periods.
Related calculators
Educational guides
Short explainers covering the math and concepts behind this calculator.
CAGR smooths growth into a constant annual rate and does not reflect volatility or yearly fluctuations.