Use the CAGR calculator by entering your starting amount, final amount and the number of years; it returns the average yearly growth rate. For example, $3,200 growing to $5,000 in 4 years equals 11.8 % CAGR. The S&P 500’s long-term CAGR is about 10 % (Damodaran, 2023).
Compound Annual Growth Rate Calculator
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How to use the tool
Beginning Value – type your initial investment, e.g., $3,200 or $9,750.
Ending Value – add its current worth, such as $5,000 or $13,400.
Number of Periods (years) – enter the elapsed time, for instance 4 or 8.
Read the result – the calculator shows the compound annual growth rate as a percentage.
CAGR ignores interim cash flows—use IRR if deposits or withdrawals occur (Investopedia, https://www.investopedia.com/terms/i/irr.asp).
Financial analysts favour CAGR for comparing uneven time spans (Morningstar, https://www.morningstar.com).
FAQ
What does CAGR tell you?
CAGR shows the fixed annual rate that would grow your starting amount to the ending amount over the chosen period, smoothing out volatility (Investopedia, https://www.investopedia.com/terms/c/cagr.asp).
Why not rely on average annual return?
An arithmetic average overstates performance because it ignores compounding; CAGR incorporates compounding, giving a true growth picture (Finance Train, https://financetrain.com).
Can CAGR be negative?
Yes. If the ending value is lower than the beginning value, the ratio inside the formula falls below 1, producing a negative rate that represents shrinkage (Corporate Finance Institute, https://corporatefinanceinstitute.com).
How accurate is CAGR for volatile assets?
CAGR masks year-to-year swings; pairing it with standard deviation or drawdown reveals volatility hidden by the smooth average (Hull, 2022).
When should I use IRR instead?
Use IRR when the investment has multiple inflows or outflows, such as rental property cash streams, because CAGR assumes a single initial outlay (Investopedia, https://www.investopedia.com/terms/i/irr.asp).
How do I project a target value with CAGR?
Rearrange the formula: Target = Beginning × (1 + CAGR)Years. This lets you estimate future balances under a chosen growth rate (Kenton, 2023).
Is CAGR affected by inflation?
No, CAGR is nominal. Subtract the average inflation rate to find the real growth rate (U.S. BLS CPI FAQ, https://www.bls.gov).
What range of years works best?
Three to ten years balances short-term noise and long-term regime changes; analysts often benchmark over 5-year periods (Morningstar Methodology, https://www.morningstar.com).
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