An investment that grew from $10,000 to $16,000 in four bumpy years — what was its "real" annual return? Simple averages mislead because growth compounds; the honest answer is the compound annual growth rate (CAGR): the single steady rate that would have taken the start value to the end value over the same period. Investors use it to compare funds, stocks and portfolios across different time spans; businesses use it for revenue, users and market growth. This calculator takes any beginning value, ending value and time period and returns the CAGR, plus the total growth percentage — with an optional year-by-year smoothed path so you can see what "steady" would have looked like.
The formula
Example
$10,000 → $16,000 in 4 years. CAGR = (1.6)0.25 − 1 ≈ 12.47% per year. Total growth: 60%.
CAGR vs average annual return
A fund up 50% one year and down 30% the next averages +10% arithmetically — but $100 becomes $105, a true CAGR of just 2.47%. CAGR accounts for compounding and volatility drag, which is why professionals quote it instead of simple averages. Its weakness: it hides the bumps. Two investments with the same CAGR can have wildly different risk.
Frequently asked questions
What is CAGR?
Compound Annual Growth Rate — the constant yearly rate that would grow a beginning value into an ending value over a given period, accounting for compounding.
What is a good CAGR?
For stock investments, 7–10% long-term is historically strong. For a business, it depends on stage and industry — 15–25%+ is excellent for an established company.
Can CAGR be negative?
Yes. If the ending value is below the beginning value, CAGR is negative — e.g. $10,000 → $8,000 in 2 years is about −10.6% per year.