Compound Growth Rate (CAGR) Calculator

About Compound Growth Rate (CAGR) Calculator

How the CAGR Formula Works

The formula is: CAGR = (Ending Value / Starting Value) ^ (1 / Number of Years) - 1. It answers a simple question: what single annual growth rate, compounded each year, would have taken the starting value to the ending value over the given time period?

Worked example: An investment grows from $10,000 to $25,000 over 5 years. CAGR = (25,000 / 10,000) ^ (1/5) - 1 = (2.5) ^ (0.2) - 1 = 1.2011 - 1 = 0.2011, or 20.11% per year. That means $10,000 growing at exactly 20.11% annually for 5 years becomes $25,000. The actual yearly returns might have been 30% one year and 5% the next, but the CAGR gives a single smoothed figure.

Starting Value	Ending Value	Years	CAGR	Interpretation
$10,000	$20,000	5	14.87%	Doubled in 5 years
$10,000	$20,000	10	7.18%	Doubled in 10 years
$10,000	$50,000	10	17.46%	5x return in a decade
$10,000	$100,000	20	12.20%	10x over 20 years
$10,000	$8,000	3	-7.17%	Lost money (negative CAGR)

Notice that doubling your money in 5 years requires a 14.87% CAGR, but doubling in 10 years only needs 7.18%. This is the Rule of 72 in action - divide 72 by the growth rate to estimate the doubling time (72 / 7.2 is roughly 10 years).

Why CAGR Beats Simple Average Return

Simple average return adds up each year's return and divides by the number of years. This can be dangerously misleading because it ignores the compounding effect. Consider an investment that gains 50% in year one and loses 50% in year two. The simple average return is (50% + -50%) / 2 = 0%, which suggests you broke even. But the reality: $100 becomes $150 after year one, then loses 50% to become $75. You lost $25, or 25% of your money.

CAGR captures this correctly: (75 / 100) ^ (1/2) - 1 = -13.4%. The more volatile the returns, the bigger the gap between simple average and CAGR. This is called "volatility drag" - high volatility reduces the actual compounded return even if the arithmetic average looks fine.

Metric	How It Works	Result for +50%/-50%	Result for +100%/-50%
Simple average	(Year 1 + Year 2) / 2	0%	+25%
CAGR	(End / Start) ^ (1/N) - 1	-13.4%	0% (broke even)
Actual outcome	Track the money	$100 to $75 (lost $25)	$100 to $200 to $100 (no gain)

Fund managers sometimes advertise the "average annual return" because it looks better than the CAGR. Always ask which figure is being quoted. CAGR reflects what actually happened to the money.

How to Use Projection Mode

Switch to projection mode to answer questions like "If I invest $10,000 today at 8% growth, what will it be worth in 20 years?" Enter a starting value, an expected CAGR, and a time horizon. The calculator applies the compound growth formula: Future Value = Starting Value x (1 + CAGR) ^ Years.

Worked example: $10,000 at 8% for 20 years = $10,000 x (1.08) ^ 20 = $10,000 x 4.661 = $46,610. The bar chart makes the exponential curve visible - growth accelerates in the later years as compounding builds on an increasingly large base.

Starting Value	CAGR	After 5 Years	After 10 Years	After 20 Years	After 30 Years
$10,000	6%	$13,382	$17,908	$32,071	$57,435
$10,000	8%	$14,693	$21,589	$46,610	$100,627
$10,000	10%	$16,105	$25,937	$67,275	$174,494
$10,000	12%	$17,623	$31,058	$96,463	$299,599

The difference between 8% and 12% CAGR over 30 years on a $10,000 investment is nearly $199,000. Small differences in growth rate produce enormous differences over long time horizons. This is why even a 1-2% difference in fund fees matters over a career of investing. For projections that include regular monthly contributions, use the Compound Interest Calculator.

Historical CAGR Benchmarks by Asset Class

How fast have major asset classes actually grown? Here are long-term CAGRs compiled from Morningstar SBBI data, NYU Stern research (Aswath Damodaran), and index providers. All figures are nominal (before inflation).

Asset / Index	Approximate CAGR	Period	Source
S&P 500 (total return, dividends reinvested)	~10.3%	1926-2025	Macrotrends / Morningstar SBBI
S&P 500 (inflation-adjusted)	~7.2%	1926-2025	Macrotrends
Long-term US government bonds	~5.9%	1926-2024	Morningstar SBBI
Gold	~8.2%	1971-2024	World Gold Council / Statista
US residential real estate	~3.9%	1987-2024	S&P Case-Shiller National Index
Bitcoin	~103%	2013-2025	Curvo / CoinGlass (extremely volatile, short history)
Savings accounts (national average)	~0.4%	As of March 2026	FDIC
US inflation (CPI)	~3.0%	1926-2024	Morningstar SBBI

Bitcoin's triple-digit CAGR comes from a very short history starting at pennies - its annualised volatility exceeds 180% (Curvo, 2026). The S&P 500's ~10.3% CAGR is the most commonly cited benchmark for "stock market returns." To convert nominal CAGR to real (inflation-adjusted) CAGR, subtract roughly 3% for long-run US inflation.

Using CAGR to Compare Investments

CAGR is ideal for comparing investments held over different time periods, because it normalises everything to an annual rate. A stock that returned 140% over 7 years and a stock that returned 80% over 3 years are hard to compare on raw returns alone. CAGR makes the comparison fair:

Investment	Start	End	Years	Total Return	CAGR
Stock A	$5,000	$12,000	7	140%	13.3%
Stock B	$5,000	$9,000	3	80%	21.6%
Property	$200,000	$350,000	10	75%	5.8%
Index fund	$10,000	$26,000	10	160%	10.0%

Stock B has a higher CAGR (21.6%) than Stock A (13.3%), despite having a lower total return (80% vs 140%). The shorter time period means the annual growth rate was much faster. Use CAGR alongside the ROI Calculator to get both the total and annualised perspective on a position.

When CAGR Can Be Misleading

CAGR is a powerful metric, but it has real limitations that are worth understanding:

It hides volatility. Two investments can have the same CAGR but wildly different risk profiles. One might have grown steadily at 8% every year. The other might have swung between +40% and -20%, arriving at the same endpoint. CAGR treats them identically, but the second investment involved far more risk and emotional stress.

It ignores cash flows. CAGR assumes a single lump sum invested at the start with no additions or withdrawals. If you made monthly contributions (dollar-cost averaging), CAGR will not accurately reflect your personal rate of return. For investments with ongoing contributions, use IRR (Internal Rate of Return) or the DCA Calculator for a more accurate picture.

Start and end dates matter a lot. CAGR only looks at two data points - the beginning and the end. If you calculate the S&P 500 CAGR starting from a market peak in 2000 versus a market trough in 2009, you get very different numbers for the same index. Picking favourable start or end dates can make any asset look good or bad.

It does not account for inflation. A 10% nominal CAGR with 3% inflation gives roughly 7% real purchasing power growth. Always consider whether CAGR figures are nominal or real when comparing across different time periods or countries with different inflation rates. The Inflation Calculator can help adjust values for purchasing power.

It assumes reinvestment. CAGR implicitly assumes all returns are reinvested. If you took dividends as cash rather than reinvesting them, your actual growth would be lower than the CAGR figure suggests. The Dividend Reinvestment Calculator shows the concrete difference reinvesting makes over time.

CAGR in Business and Revenue Contexts

CAGR is not just for investments - it is widely used to measure business revenue growth, market size, customer base expansion, and industry trends. When an analyst says "the cloud computing market is growing at a 16% CAGR," they mean total market revenue is compounding at 16% per year over the measured period.

In startup and venture capital contexts, revenue CAGR is a key metric for evaluating growth trajectory. A SaaS company growing revenue from $1 million to $5 million over 3 years has a revenue CAGR of (5/1) ^ (1/3) - 1 = 71%. Investors compare this against industry benchmarks to assess whether growth is strong enough to justify a valuation multiple.

Earnings-per-share (EPS) CAGR is another common application. If a company's EPS grew from $2.00 to $3.50 over 5 years, the EPS CAGR is (3.50/2.00) ^ (1/5) - 1 = 11.8% per year. This figure appears frequently in stock screeners and equity research reports as a measure of profitability growth independent of share price movements.

Practical Tips for Using CAGR

Compare like with like. When comparing two funds, make sure both CAGRs cover the same time period or at least similar market conditions. A fund that posted 15% CAGR from 2009-2019 (a bull market) is not directly comparable to one that posted 8% CAGR from 2000-2010 (which included two crashes).

Use CAGR alongside other metrics. Pair it with standard deviation (for risk), maximum drawdown (worst peak-to-trough decline), and Sharpe ratio (risk-adjusted return) to get a complete picture. A 12% CAGR with 30% annual volatility is a very different proposition from a 10% CAGR with 10% volatility.

Use conservative assumptions for planning. The S&P 500 has historically delivered about 10.3% nominal and 7.2% real (Macrotrends, 1926-2025). Many financial planners use 6-7% as a conservative real-return assumption for stock-heavy portfolios, and 3-4% for balanced portfolios including bonds. Overly optimistic CAGR assumptions in retirement planning can lead to significant shortfalls.

Watch for survivorship bias. Historical CAGR figures for indices like the S&P 500 benefit from survivorship bias - poorly performing companies are removed from the index and replaced with growing ones. The returns of the index as a whole look better than the average return of all individual stocks over the same period.

To calculate total return with regular contributions over time, use the Investment Return Calculator. For a quick estimate of how long it takes money to double at a given rate, try the Rule of 72 Calculator. All calculations run entirely in your browser.

Sources

• Investopedia - Compound Annual Growth Rate (CAGR)
• Macrotrends - S&P 500 Historical Annual Returns
• NYU Stern (Damodaran) - Historical Returns on Stocks, Bonds and Bills
• FRED - S&P/Case-Shiller U.S. National Home Price Index
• FDIC - National Rates and Rate Caps
• SEC - Beginners' Guide to Asset Allocation