CAGR Calculator 📅
Find the **Compound Annual Growth Rate (CAGR)**, which represents the constant rate of return that would be required for an investment to grow from its initial value to its final value.
CAGR Parameters
CAGR: The Smoothed Return
CAGR is a fundamental metric that provides the best measure of an investment's annual growth rate assuming the profits were reinvested. It irons out the volatility of year-to-year returns to provide a representative, constant growth figure.
The Formula
CAGR = [ (Ending Value / Starting Value) ^ (1 / Number of Years) ] - 1
CAGR simplifies the complex path of investment growth into a single, easily comparable number. It's often used to compare the performance of different stocks, mutual funds, or business segments.
CAGR vs. Average Annual Return
Unlike the Simple Average Annual Return, **CAGR** uses the geometric mean and accounts for the compounding effect. If a stock goes up 50% one year and down 20% the next, the simple average is 15%, but the CAGR (true return) is only about 9.54%. CAGR is therefore a more accurate measure of investment performance over time.