CAGR Calculator: How to Calculate Compound Annual Growth Rate for Your Investments

When evaluating an investment, one of the most important metrics is the Compound Annual Growth Rate (CAGR). Unlike a simple percentage return, CAGR tells you the average annual rate of growth over a specific time period — smoothing out year-to-year volatility so you can compare different investments on equal footing. Use the CAGR Calculator at Today Calculator to quickly compute CAGR for any investment.

The CAGR Formula

CAGR = (Ending Value / Beginning Value)^(1 / Number of Years) – 1

For example, if you invested $10,000 and it grew to $16,000 over 5 years:

CAGR = ($16,000 / $10,000)^(1/5) – 1 = 1.6^(0.2) – 1 = 9.86% per year

This means your investment grew at an average rate of 9.86% each year — even if individual years had higher or lower returns.

CAGR Examples Across Different Scenarios

Initial Investment	Ending Value	Time Period	CAGR	Interpretation
$10,000	$16,000	5 years	9.86%	Solid stock market return
$50,000	$75,000	3 years	14.47%	Strong growth (e.g., tech stock)
$100,000	$120,000	10 years	1.84%	Below-average (bond-like return)
$5,000	$12,500	7 years	13.99%	Excellent growth (e.g., index fund)

Why CAGR Matters

• Apples-to-apples comparison: CAGR lets you compare a 3-year stock investment to a 7-year real estate investment on the same annualized scale
• Volatility smoothing: A fund might return +30% one year and –10% the next. CAGR tells you the real average growth
• Goal tracking: If you need $50,000 in 10 years from a $20,000 investment, you can calculate the required CAGR (about 9.6%) to see if it is realistic
• Historical performance: The S&P 500 has delivered an average CAGR of about 10% over long periods (before inflation)

CAGR vs. Average Annual Return

A common misconception is confusing average annual return with CAGR. Suppose an investment returns +100% in year one and –50% in year two. The average annual return is (+100% + –50%) / 2 = 25%. But the actual CAGR is 0% — because $10,000 grows to $20,000 (year 1) then falls back to $10,000 (year 2). CAGR reflects the real growth; the average does not.

For quick and accurate CAGR calculations, use the CAGR Calculator at Today Calculator. Enter your beginning value, ending value, and time period for an instant result.