CAGR Calculator (Compound Annual Growth Rate)
Written by Greg, founder of FTMarketWatch — a former licensed commodities trader, self-directed investor since. Not a licensed financial advisor.
Last reviewed: September 2, 2026
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This tool assumes a smooth growth path and does not show year-to-year volatility. It is most useful for summarising past performance, not predicting future returns.
How CAGR fits into the bigger picture
CAGR is a useful way to summarise past performance and compare investments over different time periods. It connects naturally with the ideas on:
- Risk, Return and Diversification for thinking about the trade-offs behind different return profiles.
- Asset Allocation for deciding how much risk you are willing to take in pursuit of higher expected returns.
- Investing 101 for building a plan that focuses on long-term averages rather than short-term noise.
Remember that two investments can have the same CAGR but very different paths along the way. Volatility and drawdowns still matter, especially when you are adding or withdrawing money over time.
CAGR formula
CAGR = (Ending value ÷ Starting value)1 ÷ years − 1. It answers a simple question: what constant annual growth rate would turn the starting value into the ending value over the period?
Example
If an investment grows from $10,000 to $15,000 over five years, its CAGR is about 8.45%. That does not mean it earned 8.45% in each individual year. Actual returns may have been much more uneven.
CAGR vs. average return
A simple arithmetic average can be misleading when returns compound. CAGR reflects the effect of compounding between the starting and ending values, which makes it useful for comparing growth over equal or different time periods.
Limitations
CAGR ignores the path taken between the start and end dates. It does not show volatility, drawdowns, cash contributions, withdrawals, taxes or fees unless those effects are already reflected in the values you enter.