CAGR formula
CAGR = (End ÷ Start)1 / years − 1
Example
An investment grew from $10,000 to $18,000 over 6 years. (18,000 ÷ 10,000)^(1/6) − 1 = 1.8^0.1667 − 1 ≈ 10.29% a year. The total gain is 80%, but CAGR shows the equivalent steady yearly rate.
Limits of CAGR
- It hides volatility. Two investments with the same CAGR can have very different rides.
- It ignores money added or withdrawn. For investments with regular contributions, a money-weighted return is more accurate.
- It only looks at two points, so picking a different start or end date can change the result a lot.
Comparing gain on a single investment? Use the ROI calculator. To project growth with contributions, try the investment calculator.
Last reviewed October 2026.
Frequently asked questions
What is CAGR?
CAGR, the compound annual growth rate, is the steady yearly rate that would take a starting value to an ending value over a number of years. It smooths out the ups and downs into one comparable figure.
How do you calculate CAGR?
CAGR = (ending value ÷ beginning value)^(1 ÷ years) − 1. Growing from $10,000 to $18,000 in 6 years gives (1.8)^(1/6) − 1 ≈ 10.29% a year.
Why is CAGR lower than the average return?
Simple averages overstate growth when returns swing. A 50% gain followed by a 50% loss averages 0%, yet you end with 75% of what you started with. CAGR reflects what actually happened to your money.
Can I use CAGR for revenue or users, not just investments?
Yes. CAGR works for any quantity that grows over time: company revenue, website visitors, population or prices. It does not account for deposits or withdrawals along the way.
Can CAGR be negative?
Yes. If the ending value is below the starting value, CAGR is negative, showing the average yearly rate of decline.