CAGR — compound annual growth rate — is the single steady annual rate at which an investment grew from a starting value to an ending value over a number of years. It is calculated as (ending value ÷ starting value) raised to the power of (1 ÷ years), minus 1. It smooths out the ups and downs into one representative yearly figure.

Is CAGR the same as annualized return?

For a single starting value growing to a single ending value over a period, yes — CAGR is the annualized return. (The terms can differ when there are interim cash flows, where a money-weighted or time-weighted return is used, but for a simple start-to-end figure they are identical.)

How do you calculate CAGR?

CAGR = (ending value ÷ starting value)^(1 ÷ number of years) − 1. For example, $10,000 growing to $20,000 over 10 years is (20,000 ÷ 10,000)^(1/10) − 1 ≈ 7.18% a year — not 10%, because compounding does part of the work.

Why is CAGR lower than the average annual return?

Because of compounding and volatility. A simple average ignores that gains build on prior gains and that a loss requires a larger gain to recover. CAGR reflects the actual compounded path, so it is usually lower than the arithmetic average of the yearly returns — and a more honest measure of growth.

What is a good CAGR for an investment?

It depends on the asset and period, but as a rough benchmark the broad US stock market has historically returned roughly 7–10% a year over long periods before inflation. A CAGR well above that may carry more risk; one below it may lag a simple index fund. Always compare against a relevant benchmark, not in isolation.

CAGR Calculator

Turn a starting value, ending value, and time period into the compound annual growth rate — the same as your annualized return.

Your investment

Starting value

Ending value

Years

CAGR (annualized return)

7.18%

Total return

100.00%

Multiple

2.00×

Over

10 years

What this means

Growing from $10,000 to $20,000 over 10 years is a 2.00× increase — equal to 7.18% compounded every year. CAGR smooths the whole period into one steady annual rate; it is the same as the annualized return, and lower than the simple average because compounding does part of the work.

For educational purposes only. CAGR describes past growth between two points; it is not a forecast of future returns. Not financial advice.

How CAGR (and annualized return) is calculated

The formula is (ending value ÷ starting value)^{1 / years} − 1. $10,000 growing to $20,000 over ten years is a 2× increase — which works out to about 7.18%compounded every year, not 10%, because each year’s growth builds on the last.

For a single start-to-end figure, CAGR isthe annualized return. It’s usually lower than the simple average of the yearly returns, because compounding and volatility mean a loss needs a bigger gain to recover — so CAGR is the more honest growth measure.

For the dividend-specific version of this math, use the dividend growth rate calculator; to project a value forward from a rate, use the compound interest calculator.

Frequently asked questions

What is CAGR?: CAGR — compound annual growth rate — is the single steady annual rate at which an investment grew from a starting value to an ending value over a number of years. It is calculated as (ending value ÷ starting value) raised to the power of (1 ÷ years), minus 1. It smooths out the ups and downs into one representative yearly figure.
Is CAGR the same as annualized return?: For a single starting value growing to a single ending value over a period, yes — CAGR is the annualized return. (The terms can differ when there are interim cash flows, where a money-weighted or time-weighted return is used, but for a simple start-to-end figure they are identical.)
How do you calculate CAGR?: CAGR = (ending value ÷ starting value)^(1 ÷ number of years) − 1. For example, $10,000 growing to $20,000 over 10 years is (20,000 ÷ 10,000)^(1/10) − 1 ≈ 7.18% a year — not 10%, because compounding does part of the work.
Why is CAGR lower than the average annual return?: Because of compounding and volatility. A simple average ignores that gains build on prior gains and that a loss requires a larger gain to recover. CAGR reflects the actual compounded path, so it is usually lower than the arithmetic average of the yearly returns — and a more honest measure of growth.
What is a good CAGR for an investment?: It depends on the asset and period, but as a rough benchmark the broad US stock market has historically returned roughly 7–10% a year over long periods before inflation. A CAGR well above that may carry more risk; one below it may lag a simple index fund. Always compare against a relevant benchmark, not in isolation.

Related calculators

Dividend Growth Rate Calculator

The same CAGR math, applied to a dividend instead of a portfolio value.

Compound Interest Calculator

Project a value forward from a rate, the inverse of CAGR.

Dividend Reinvestment Calculator

Compound reinvested dividends over time.

Dividend Calculator

Project dividend portfolio growth.