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Get the average rate of return on your investments for the year using this reliable online calculator tool
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Our CAGR calculator helps you determine the Compound Annual Growth Rate of an investment over a specific period. This tool is ideal for evaluating the performance of stocks, mutual funds, or other financial instruments by providing the average annual growth rate assuming steady compounding.
CAGR stands for Compound Annual Growth Rate. It measures the mean annual growth rate of an investment over time, assuming profits are reinvested and compounded each year.
This metric is especially useful for investors because it smooths out fluctuations, giving a clear picture of the investment's true performance over a period.
To calculate CAGR, divide the investment’s ending value by its beginning value, raise it to the power of 1 divided by the number of years, and subtract one:
CAGR = (Ending Value / Beginning Value)^(1 / Number of Years) - 1
To find CAGR, you need the initial investment, the final value after the investment period, and the number of years invested.
Suppose you invested $8,000 in a mutual fund 4 years ago, and its current value is $12,000. Let’s calculate the CAGR.
Formula:
CAGR = (EV / BV)^(1/n) - 1
Substitute the values:
CAGR = (12,000 / 8,000)^(1/4) - 1
CAGR = (1.5)^0.25 - 1
CAGR ≈ 1.1067 - 1
CAGR ≈ 0.1067 or 10.67%
This means the investment grew at an average rate of approximately 10.67% per year.
| Type of Company | Typical Good CAGR |
| Large-cap | 5% - 12% |
| Small-cap | 15% - 30% |
| Start-ups | 100% - 500% |
A 10% CAGR indicates that the investment grows by 10% per year, and each year’s growth compounds, so your total returns accumulate exponentially over time.
No. While AAGR averages yearly growth without compounding, CAGR accounts for compounding over the entire period, providing a more accurate representation of investment growth.
Yes. A negative CAGR shows the investment lost value over the period, reflecting a decline instead of growth.
The table below shows how an investment grows over 10 years with a 10% CAGR:
| Year | Investment Value | CAGR (%) |
|---|---|---|
| 0 | $10,000 | - |
| 1 | $11,000 | 10 |
| 2 | $12,100 | 10 |
| 3 | $13,310 | 10 |
| 4 | $14,641 | 10 |
| 5 | $16,105 | 10 |
| 6 | $17,715 | 10 |
| 7 | $19,487 | 10 |
| 8 | $21,436 | 10 |
| 9 | $23,579 | 10 |
| 10 | $25,937 | 10 |
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