CAGR Calculator
Calculate the average annual growth rate of an investment or business metric. CAGR is the best way to compare the performance of different investments over time.
What is CAGR?
CAGR stands for Compound Annual Growth Rate. It is the mean annual growth rate of an investment over a specified period of time longer than one year. It represents one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time.
How is CAGR calculated?
The formula for CAGR is: [(Ending Value / Beginning Value)^(1 / Number of Years)] - 1. This result is then multiplied by 100 to get a percentage.
What does CAGR tell an investor?
CAGR is a "smoothed" rate of return. It doesn't reflect the volatility or the actual year-by-year growth, but rather provides a single number that describes the rate at which an investment would have grown if it had grown at a steady rate each year with profits reinvested.
What are the limitations of CAGR?
CAGR only looks at the beginning and ending values and the time elapsed. It ignores what happens in between (volatility) and doesn't account for any additional investments or withdrawals made during the period.