The CAGR formula
CAGR is the constant yearly rate that would turn the starting value into the ending value over a given number of years. It smooths the journey between those values.
For a fractional holding period, enter the number of years as a decimal. For example, six months is 0.5 years. Use consistent valuation dates and amounts in the same currency.
Doubling over ten years
An investment growing from $10,000 to $20,000 in ten years has a 100% total return and approximately 7.18% CAGR. It did not need to earn 7.18% in every individual year. That is simply the equivalent smooth annual rate.
By comparison, dividing the 100% total return by ten gives 10%, which is not the compound annual growth rate.
When CAGR is misleading
Additional deposits can increase an ending account value without representing investment growth. Withdrawals can reduce it without representing losses. This two-value calculation does not adjust for either.
For accounts with cash flows, a money-weighted or time-weighted performance calculation needs more information. CAGR also hides volatility and the timing of gains and losses within the period.
Frequently asked questions
What happens if the ending value is zero?
The total return is −100%, and the equivalent CAGR is −100%. There is no remaining investment value to compound.
Does CAGR include dividends?
Only if your ending value includes them. For a total-return comparison, account consistently for reinvested distributions. This calculator does not fetch price or dividend data.
Can I use it for monthly investing?
The simple starting-value and ending-value formula does not measure performance correctly when money is added during the period. Use the compound growth tool to model regular contributions under an assumed return.
Published by investor.wtf. Read the formulas, assumptions, and how these pages are made.