CAGR Calculator | Compound Annual Growth Rate

CAGR Calculator

Use this Compound Annual Growth Rate (CAGR) calculator to determine the average annual growth rate of an investment or business over a specific period, assuming the profits are reinvested.

Beginning Value ($)

The starting value of your investment or asset.

Ending Value ($)

The value of your investment or asset at the end of the period.

Number of Years

The total duration of the investment in years.

How it works

Use this Compound Annual Growth Rate (CAGR) calculator to determine the average annual growth rate of an investment or business over a specific period, assuming the profits are reinvested.

The Formula

CAGR = ((Ending Value / Beginning Value)^(1 / Number of Years)) - 1

Worked Example

Example: Investment Growth
Imagine you invested $1,000 five years ago, and it's now worth $1,610.51. To find the CAGR: Beginning Value = $1,000 Ending Value = $1,610.51 Number of Years = 5 CAGR = (($1,610.51 / $1,000)^(1 / 5)) - 1 CAGR = (1.61051^(0.2)) - 1 CAGR = 1.10 - 1 CAGR = 0.10 or 10% So, your investment grew at an average rate of 10% per year.

Tips, Assumptions & Limitations

Ensure your 'Beginning Value' is not zero or negative, as CAGR cannot be calculated in such cases.
The 'Number of Years' should be a positive value representing the duration of the investment.
CAGR smooths out volatility, giving you a clearer picture of average growth over time.

FAQ

CAGR stands for Compound Annual Growth Rate. It's the average annual rate at which an investment grows over a specified period, assuming the profits are reinvested at the end of each year. It provides a smoothed growth rate, ignoring the volatility that might occur in between.

Simple annual growth only considers the growth from the initial value each year without accounting for compounding. CAGR, however, takes into account the compounding effect, giving you a more accurate representation of the average annual return over multiple periods, especially for investments where earnings are reinvested.

Yes, CAGR can be negative if the ending value of your investment is less than its beginning value. A negative CAGR indicates an average annual loss over the period.

You should use the CAGR calculator when you want to understand the average annual growth of an investment, a business's revenue, or any metric that compounds over time. It's particularly useful for comparing the performance of different investments over the same period.