Collapse a bumpy investment into one honest number. Enter the beginning value, the ending value and the years held, and get the compound annual growth rate plus the total growth and the multiple.
Estimates only. This tool is provided for educational purposes and is not financial advice. It models the figures you enter — it does not know your credit terms, local taxes, or fees. Talk to a licensed adviser before making a decision.
$10,000 grows to $18,000 over 5 years. Total growth is $8,000, an 80% return and a 1.80× multiple. The CAGR is 12.47% a year — the steady rate that would produce the same endpoint.
CAGR = (End ÷ Begin)1/n − 1
where n is the number of years. It is a geometric mean, not an arithmetic one, which is why you cannot simply divide total return by the years.
A fund up 50% then down 33% is not flat: 1.50 × 0.67 = 1.005, so the average of +50% and −33% (+8.5%) badly overstates what happened. Compounding is multiplicative, and only a geometric measure respects that.
CAGR is a smoothing device. It says nothing about the path taken, the volatility, or the drawdowns along the way. Two investments can share a CAGR while feeling completely different to hold — one a steady climb, the other a round trip through a 40% loss.
What is CAGR in simple terms?
The steady yearly growth rate that would take a beginning value to an ending value over a set number of years. It smooths out the ups and downs into a single comparable number.
How is CAGR different from average annual return?
Average return adds the yearly figures and divides by the count. CAGR is a geometric mean, compounding each year. For volatile returns the average always looks better than the CAGR.
Can CAGR be negative?
Yes. If the ending value is below the beginning value the CAGR is negative — it is the annualised rate of decline.
Does CAGR account for dividends or deposits?
Only if they are already reflected in the ending value and no money was added or withdrawn in between. For irregular cash flows use IRR or XIRR instead.
What counts as a good CAGR?
It depends on the asset and the period. A broad equity index has historically compounded around 7–10% a year in nominal terms over long stretches, but any single decade can differ sharply.