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CAGR Calculator (Compound Annual Growth Rate)

Calculate the CAGR of your investment: compound annual growth rate, multiplier, and future projections.

Sources: CFA Institute -- Compound Annual Growth Rate · Investopedia -- CAGR Formula and Calculation

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How to Calculate CAGR (Compound Annual Growth Rate)

CAGR is the most widely used metric in the financial world for expressing the growth of an investment on an annual basis. Unlike total return, CAGR normalizes the result over one year, making investments of different durations comparable.

The CAGR Formula

CAGR = (Final Value / Initial Value)^(1/n) - 1

Where n is the number of years. For example, if you invested $10,000 and after 5 years have $16,105: CAGR = (16,105 / 10,000)^(1/5) - 1 = 10.0% per year.

Why CAGR Is Better Than Average Return

The arithmetic average return can be misleading. Classic example: Year 1: +100%, Year 2: -50%. The average return is (+100% - 50%) / 2 = +25%, but you actually gained nothing! The CAGR is correctly 0%.

Reference Benchmarks

To evaluate your CAGR, compare it with these historical benchmarks: S&P 500 (1926-2025): CAGR ~10% gross, ~7% real; MSCI World: ~8-9% gross; US Treasury 10Y: ~3-4%; Average inflation: ~2-3%.

Projections: Useful but With Caution

The calculator projects the historical CAGR 5 and 10 years into the future. These are indicative scenarios assuming past growth continues. In reality, returns are volatile and the past does not guarantee the future.

Frequently Asked Questions

What is CAGR and what is it used for?▼
CAGR (Compound Annual Growth Rate) is the compound annual growth rate of an investment. It represents the constant annual return that, applied for n years, transforms the initial value into the final value. It is the standard metric for comparing investments with different durations.
What is the difference between CAGR and average return?▼
The arithmetic average return adds annual returns and divides by the number of years. CAGR considers the compounding effect. An investment that gains 50% one year and loses 50% the next has an average return of 0%, but a CAGR of -13.4%. CAGR is always more accurate.
What is a good CAGR for an investment?▼
It depends on the asset class. The S&P 500 has had a historical CAGR of about 10% gross (7% real, after inflation). A CAGR above 10% is excellent, between 5-10% is good, below 5% is moderate. Always compare with inflation.