CAGR Calculator
How it works
The starting and ending value first collapse into one number: the multiple, finalValue / initialValue. Doubling is a multiple of 2 regardless of whether it took one year or twenty, so the multiple alone cannot be the answer — it has to be spread back out over the years it took. That is what taking its 1/years power does: it asks "what single per-year factor, multiplied by itself this many times, reaches this multiple?" Subtracting 1 turns that factor (1.08, say) into the more familiar percentage form (8%).
Total growth is simpler and does not involve the years at all — it is just the multiple minus one, expressed as a fraction. A value that reached 1.5x its start grew 50% in total, however long that took; CAGR is what turns that same 50% into a fair yearly figure once the number of years is known.
Frequently asked questions
What is CAGR?
The single steady annual rate that would turn a starting value into an ending value over a given number of years, if it grew by the same percentage every year. Real investments do not grow that smoothly, so CAGR is a summary of the whole period rather than a description of any one year in it.
How is it different from average annual return?
Average return adds up each year's percentage change and divides by the number of years — it ignores that growth compounds. CAGR instead takes the total multiple the value grew by and finds its own root, so it accounts for gains building on gains. The two only match exactly when the return truly was identical every year.
Can CAGR be negative?
Yes — whenever the ending value is below the starting value. The multiple is then below 1, and its root is also below 1, so the CAGR comes out between -1 and 0 (between -100% and 0%). A CAGR of -1 would mean the value fell all the way to zero.