How to use the CAGR calculator
- Enter the starting value of an investment, a business’s revenue or anything that grows.
- Enter the ending value and the period between them in years and months.
CAGR formula
The compound annual growth rate is the steady yearly rate that turns the starting value into the ending value:
\text{CAGR} = \left(\dfrac{\text{Ending value}}{\text{Starting value}}\right)^{1/n} - 1(2,00,000 ÷ 1,00,000)1/5 − 1 = 14.87% a year. The absolute return is 100%, but spread over five years it is about 14.87% a year.
CAGR vs absolute return
The absolute return only says how much something grew in total. CAGR turns it into a yearly rate, so investments held for different lengths of time can be compared fairly. CAGR smooths out the ups and downs along the way – the actual year-to-year returns will differ.
Project growth forward with the lumpsum calculator, or use the ROI calculator for a simple return.
Frequently asked questions
What is CAGR?
Compound annual growth rate – the steady yearly growth rate that would take a starting value to an ending value over a number of years.
What is a good CAGR?
It depends on the asset. Broad stock markets have returned roughly 10–12% a year over long periods; 15% or more over 10 years is excellent. Fixed deposits give 6–8%.
How is CAGR different from average return?
An average of yearly returns ignores compounding. A gain of 50% followed by a loss of 50% averages 0%, but the investment is down 25% – CAGR shows −13.4% a year.
Can CAGR be negative?
Yes. If the ending value is lower than the starting value, CAGR is negative.