CAGR & Compounding Calculator

CAGR (Compound Annual Growth Rate) is the annualised rate at which an investment would have grown if it grew at a steady rate year over year. It smooths out volatility to give a single representative yearly return, making it ideal for comparing investments over different time periods.

CAGR = (Ending Value ÷ Starting Value)^(1 ÷ Years) − 1. For example, $10,000 growing to $20,000 over 5 years: (20,000 ÷ 10,000)^(1÷5) − 1 = 2^0.2 − 1 ≈ 14.87% per year.

It depends on the asset class. For stocks, 7-10% is considered solid long-term performance. Bitcoin has historically produced far higher CAGRs but with extreme volatility. For context, the S&P 500 has returned roughly 10% annually including dividends over long periods.

Average annual return sums yearly returns and divides by years, it ignores compounding. CAGR uses the geometric mean, which accounts for the fact that gains compound. If a $100 investment falls 50% (to $50) then gains 50% (to $75), the average return is 0% but the actual CAGR is negative, because 50% down requires a 100% gain to recover.

Real investments rarely start and end on neat year boundaries. Entering months and days (or using exact start/end dates) gives a more precise annualised rate. A 14-month investment versus a 12-month one has a meaningfully different CAGR even with the same absolute return.

Yes. If the ending value is less than the starting value, CAGR is negative. A starting value of $10,000 falling to $5,000 over 4 years gives a CAGR of (0.5)^0.25 − 1 ≈ −15.91% per year.