CAGR Calculator

What is CAGR?

Compound Annual Growth Rate (CAGR) is the rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each year. It provides a smoothed annual rate that eliminates the volatility of year-to-year growth rates.

CAGR Formula

Where the exponent (1/Years) represents the reciprocal of the number of years.

CAGR vs Average Annual Growth

CAGR differs from average annual growth rate. While average growth is a simple arithmetic mean, CAGR accounts for compounding effects. CAGR is more accurate for investments and metrics that compound over time, as it considers the geometric progression of growth.

Use Cases

• • Measuring investment portfolio returns over time
• • Comparing growth rates of different investments
• • Analyzing business revenue growth
• • Evaluating mutual fund performance
• • Tracking customer base or user growth
• • Comparing company performance metrics
• • Real estate appreciation analysis
• • Salary growth calculations

Limitations

• • Assumes constant growth rate (smooths volatility)
• • Doesn't account for risk or volatility
• • Ignores intermediate cash flows or withdrawals
• • May not reflect actual year-to-year performance
• • Can be misleading for short time periods