CAGR Calculator
Compound annual growth rate, with the real return and the effect of contributions. CAGR is a smoothed rate describing two endpoints, so it says nothing about the path, and adding money along the way makes the simple root overstate.
Also called: compound annual growth rate calculator, annualised return calculator.
20.11% a year turned 10,000 into 25,000 over 5 years. No contributions, so the whole increase is growth and the simple formula is exact. Enter inflation to see the real rate, which is the figure that says whether purchasing power grew. CAGR smooths the path away entirely, so two investments with the same figure can have been very different to hold.
An estimate, not an offer or a guarantee. Projected returns assume the rate you entered holds for the whole term, which no market does.
This is what the calculation gives for the numbers you entered. It is an estimate, not advice, and it knows nothing about your situation beyond those numbers. Rules for United States change on a published schedule; the effective date is shown on every rule-based tool.
How this is calculated
The ratio of ending to starting value, raised to one over the years. That is the constant rate which would have produced the same result, and it is a smoothing: two investments with identical CAGR can differ enormously in volatility. Contributions break the simple formula, because money added in year four did not compound for five years, so the growth component is separated out. Inflation converts the nominal rate into the real one, which is what says whether purchasing power grew.
a root over the period, which smooths the path away entirely- n
- Years
Method and limits
What it assumes
- No withdrawals, and contributions made at the start of each year where entered.
What it deliberately does not model
- CAGR ignores the path entirely, so it hides volatility and drawdown.
- With irregular cash flows XIRR is the correct measure rather than this.
- A CAGR over a short period is dominated by the start and end dates chosen.
Formula version 1.0.0 · definition 1.0.0 · United States · Report a problem with this calculator
Frequently asked questions
- Why is CAGR lower than total return divided by years?
- Because compounding does the work. A 150 percent gain over five years is 20.1 percent a year, and dividing gives 30, which overstates by ten points.
- Does CAGR account for money I added?
- The simple formula does not, and it overstates when you did. Money added in year four compounded for one year, not five, which is why the growth component is separated here.