CAGR Calculator
CAGR answers a narrow question well: if an investment had grown at one steady rate from start to finish, what would that rate have been? Analysts use it to compare holdings with different horizons, and it is the fairest single number for a five-year fund return.
Inputs
Result
20.11% per year
Total growth 150%
How it works
CAGR = (End/Start)^(1/years) − 1
How the cagr calculator works
CAGR = (Ending value ÷ Beginning value)^(1 ÷ years) − 1, expressed as a percentage.
The exponent is the reciprocal of the holding period, which is what converts total growth into an annualised rate.
For periods that are not whole years, use the exact fraction — 30 months is 2.5, not 2 or 3.
Worked example: 150,000 grows to 265,000 in 6 years
- Ratio: 265,000 ÷ 150,000 = 1.7667.
- Exponent: 1 ÷ 6 = 0.16667.
- 1.7667^0.16667 ≈ 1.0993, so CAGR ≈ 9.93%.
- Check: 150,000 × 1.0993^6 ≈ 265,000. Total growth was 76.7%, but the annualised figure is under 10%.
Common mistakes to avoid
Reading CAGR as the return you experienced
It is a smoothed rate. The same 9.93% CAGR could hide a 40% crash and a 60% recovery; volatility disappears entirely from the number.
Averaging annual returns instead
The arithmetic mean of +50% and −50% is zero, but 100 becomes 75. Growth rates compound, so they must be combined geometrically.
Ignoring cash flows
CAGR assumes one deposit and one withdrawal. If you added money along the way, XIRR or a money-weighted return is the correct measure.
Frequently asked questions
What is a good CAGR for an investment?
Judge it against a benchmark and the risk taken, not an absolute figure. Beating a broad index over the same window matters more than the raw number.
How is CAGR different from absolute return?
Absolute return is total growth over the whole period; CAGR converts that into a per-year rate so different holding periods can be compared.
Can CAGR be negative?
Yes. If the ending value is lower than the beginning value, the formula returns a negative annualised rate.
Should I use CAGR for a SIP?
No — SIPs involve many cash flows, so XIRR is the appropriate measure. CAGR would overstate or understate depending on when contributions landed.
Is CAGR the same as ROI?
ROI is total gain relative to cost and ignores time. CAGR is ROI annualised, which is why a 76% ROI over six years is only about 10% a year.
Learn more
CAGR vs Average Return: The Mistake That Flatters Every Portfolio
Averaging yearly percentages makes volatile investments look better than they were. Geometric growth is the only honest way to combine returns.
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