Compound annual growth rate: the constant yearly rate that grows the starting value to the ending value over the period. CAGR = (end ÷ begin)^(1/years) − 1.

Why is CAGR lower than total return divided by years?

Because growth compounds: each year builds on the last. A 150% total gain over 6 years only needs 16.5% a year, not 25%.

Can I use months instead of years?

Yes — enter the period in years as a decimal (18 months = 1.5). The result is still an annual rate.

Does CAGR account for volatility or risk?

No — two investments with the same CAGR can have wildly different drawdowns. Pair it with the Sharpe ratio calculator to compare risk-adjusted performance.

What is a good CAGR for a portfolio?

For context, broad equity indices have historically compounded at roughly 7–10% a year over long horizons, before inflation. Sustained rates far above that usually involve leverage or concentrated risk.

How is CAGR different from average annual return?

The arithmetic average of yearly returns overstates growth when returns are volatile. CAGR is the geometric rate — what your money actually compounded at.

Stocks & Investing

CAGR Calculator

Calculate the compound annual growth rate (CAGR) from a starting value, ending value and number of years — plus total return and growth multiple.

CAGR (compound annual growth rate) is the constant yearly growth rate that carries a starting value to an ending value over a period: (end ÷ begin)^(1/years) − 1.

CAGR

+16.5%

Total return: +150%
Growth multiple: 2.5×

CAGR assumes no deposits or withdrawals between the two values.

Worked example

A portfolio grows from $10,000 to $25,000 over 6 years.

Growth multiple: $25,000 ÷ $10,000 = 2.5×
Total return: 2.5 − 1 = +150%
CAGR: 2.5^(1/6) − 1 = 16.5% per year

The portfolio compounded at 16.5% a year — the single steady rate that turns $10,000 into $25,000 in 6 years, even if the actual path was far bumpier.

How this is calculated

CAGR is the constant yearly rate that connects the two values over the period:

CAGR = (end ÷ begin)^(1 ÷ years) − 1

It is a geometric mean, so it accounts for compounding — each year's growth builds on the previous year's balance. That is why it is always lower than total return divided by years for multi-year periods.

The period does not have to be whole years: 30 months is 2.5. The result is still an annual rate, directly comparable with index returns or interest rates.

When to use this calculator

Use this to turn any before-and-after pair of values into an annual growth rate you can compare against benchmarks: a portfolio over six years, a house over fifteen, a fund's stated decade of growth. CAGR puts them all on the same per-year scale.

It is the honest way to read long-run performance, because it accounts for compounding: 150% over six years is 16.5% a year, not 25%. Marketing that divides total return by years overstates the rate every time.

Use it in reverse for planning: test what CAGR your goal implies (turning $50k into $200k in 10 years needs ~14.9% a year) and judge whether that rate is realistic for your strategy.

Common mistakes

Dividing total return by years — 150% over 6 years is not 25% a year; compounding makes the true rate 16.5%.
Using CAGR on an account with deposits or withdrawals — contributions inflate the apparent growth rate; CAGR needs a clean start and end value.
Reading a short-period CAGR as sustainable — annualising one great year tells you little about the long run.

Frequently asked questions

What is CAGR?: Compound annual growth rate: the constant yearly rate that grows the starting value to the ending value over the period. CAGR = (end ÷ begin)^(1/years) − 1.
Why is CAGR lower than total return divided by years?: Because growth compounds: each year builds on the last. A 150% total gain over 6 years only needs 16.5% a year, not 25%.
Can I use months instead of years?: Yes — enter the period in years as a decimal (18 months = 1.5). The result is still an annual rate.
Does CAGR account for volatility or risk?: No — two investments with the same CAGR can have wildly different drawdowns. Pair it with the Sharpe ratio calculator to compare risk-adjusted performance.
What is a good CAGR for a portfolio?: For context, broad equity indices have historically compounded at roughly 7–10% a year over long horizons, before inflation. Sustained rates far above that usually involve leverage or concentrated risk.
How is CAGR different from average annual return?: The arithmetic average of yearly returns overstates growth when returns are volatile. CAGR is the geometric rate — what your money actually compounded at.