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A simple total return percentage doesn't account for how long it took to earn that return, which makes it hard to compare investments held over different time periods.
This calculator finds the compound annual growth rate (CAGR) — the smoothed, year-over-year growth rate — from an investment's beginning value, ending value, and holding period.
How it works
Enter the investment's beginning value, ending value, and the number of years held. The calculator divides the ending value by the beginning value, takes that ratio to the power of 1 divided by the number of years, and subtracts 1 to find the annualized growth rate.
- Enter beginning value ($).
- Enter ending value ($).
- Enter time period (years).
- Click Calculate to see your results.
Examples
$10,000 to $25,000 over 8 years
An investment that grows from $10,000 to $25,000 over 8 years has a CAGR of about 12.135% — even though the total return is 150%.
Who should use it
- Comparing the annualized performance of different investments or business metrics.
- Evaluating portfolio or business growth over multiple years.
Industry applications
- Investment analysis
- Business and revenue growth reporting
Advantages
- Makes it possible to fairly compare investments held for different lengths of time.
- Smooths out volatility into a single, easy-to-communicate growth rate.
Limitations
- Hides volatility and drawdowns that occurred between the beginning and ending values.
Common mistakes to avoid
- Treating CAGR as if it represents actual year-by-year returns rather than a smoothed average.
- Comparing CAGR figures calculated over different time periods without noting the difference in holding length.
Best practices
- Use CAGR to compare investments over different time periods, but also review volatility or year-by-year performance for a fuller picture.
Tips
- CAGR works for more than just investments — it's also commonly used to measure the annualized growth rate of revenue, users, or any other metric that changes over time.