CAGR Calculator
↻ Updated 2026Enter a beginning and ending value with the number of years to get the annualized (compound) growth rate, plus the total cumulative return.
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How to read your CAGR
CAGR is a fiction that tells the truth. No investment actually returned 13.99% seven years running — but the constant rate that turns $10,000 into $25,000 over seven years is 13.99%, and that single number is comparable across any two investments in a way that a 150% total return never is.
How compound annual growth rate is calculated
CAGR asks one question: what constant yearly rate, compounded, would have taken the beginning value to the ending value in the time available? It's a geometric mean, and it's the inverse of the compound growth formula — you know the start, the end and the term, and you're solving for the rate.
That's why the exponent is 1 ÷ years. Compounding forward raises (1 + r) to the power of the years; going backwards takes the years-th root. Seven years means a seventh root, which is the same as raising to the power of 1/7.
CAGR = (ending value ÷ beginning value) ^ (1 ÷ years) − 1 total return = (ending value ÷ beginning value) − 1 growth multiple = ending value ÷ beginning value check: beginning value × (1 + CAGR) ^ years = ending value
- beginning value
- What the investment was worth at the start — must be above zero — a CAGR from zero is undefined, and the tool returns 0% rather than infinity
- ending value
- What it's worth now — should include reinvested dividends if you want a total-return CAGR; price alone understates a dividend payer
- years
- The holding period, in years — the single most abused input — halving the years nearly doubles the CAGR for the same gain
- growth multiple
- Ending ÷ beginning, before any rooting — 2.50× on the defaults; the multiple is what the exponent acts on
- total return
- The cumulative percentage gain over the whole period — 150% on the defaults — the number that sounds best in a pitch
The reason CAGR exists is that arithmetic averages lie about compounding, and they always lie in the same direction. Take $10,000 that gains 50% to $15,000, then loses 50% to $7,500. The arithmetic average of +50% and −50% is 0%, which implies you broke even. You didn't — you lost $2,500, and the CAGR is −13.40%. The averaging isn't wrong; it's answering a question nobody asked.
This gap is structural: CAGR ≤ arithmetic mean always, with equality only when every year is identical. The more volatile the path, the wider the gap, which is why a fund can advertise a strong average annual return while its investors' balances tell a duller story. When you see a return quoted, the useful question is whether it's the geometric one. For projecting forward rather than measuring backward, the investment growth calculator runs the same arithmetic in reverse.
Worked examples
Example: $10,000 grows to $25,000 over 7 years
The calculator's defaults. A position bought for $10,000 that's worth $25,000 seven years later, with no money added or taken out.
| Beginning value | $10,000 |
| Ending value | $25,000 |
| Growth multiple$25,000 ÷ $10,000 | 2.50× |
| Total returnthe cumulative gain | 150% |
| CAGR2.50 ^ (1/7) − 1 | 13.99% |
| Check: year 1$10,000 × 1.1399 | $11,399 |
| Check: year 4compounding, not adding $1,399/yr | $16,881 |
| Check: year 7back to the ending value | $25,000 |
13.99% a year. Note how far the compounding path is from a straight line: a simple 150% ÷ 7 would suggest 21.4% a year, which compounded would actually produce $38,863 — over half again as much as the real ending value. The rooting is doing real work. And 13.99% comfortably beats the S&P 500's ~10% long-run nominal average — which is the honest way to judge this result, rather than reacting to '150%'.
Example: the same 150% gain stretched over 20 years
Identical dollars — $10,000 in, $25,000 out. Only the holding period changes. Set years to 20 and watch the headline number collapse while the total return field doesn't move.
| Total returnunchanged — same money | 150% |
| Growth multipleunchanged | 2.50× |
| CAGR over 7 years | 13.99% |
| CAGR over 20 years2.50 ^ (1/20) − 1 | 4.69% |
| Gapfrom one input | 9.30 points |
Same $15,000 of profit, and the annual rate falls by two-thirds. 4.69% over 20 years would have lost badly to a plain index fund and roughly matched inflation plus a little. This is why total return alone is close to meaningless: it's the numerator of a fraction whose denominator got hidden. Any time a return is quoted without a period attached, the period is the part you need.
Frequently asked questions
What's the difference between CAGR and average annual return?
CAGR is a geometric mean; average annual return is usually an arithmetic mean. The arithmetic version adds the yearly returns and divides by the count, which ignores compounding entirely. The geometric version accounts for the fact that a loss and a gain of the same percentage don't cancel.
The classic demonstration: $10,000 rises 100% to $20,000, then falls 50% back to $10,000. Arithmetic average is (+100 − 50) ÷ 2 = +25% a year. Your actual gain is zero, and the CAGR says 0%. The arithmetic mean isn't just optimistic here, it's off by 25 points on an investment that made nothing. CAGR ≤ arithmetic mean is a mathematical guarantee, not a tendency — which is why performance material tends to feature the arithmetic one.
What is a good CAGR for an investment?
The reference point most US investors compare against is the S&P 500's long-run record: roughly 10% a year nominal since 1926 with dividends reinvested, about 7% after inflation. A CAGR above 10% over a long period beat the index; below it, an index fund would have done better with less effort.
Two caveats before you use that as a scorecard. Short periods prove nothing — three years of 20% CAGR is a market cycle, not skill, and the same portfolio can post a negative CAGR over the next three. And CAGR says nothing about the risk taken: 13.99% from a single stock and 13.99% from a diversified fund are the same number describing very different bets. CAGR measures the outcome and deliberately discards the path.
Does CAGR account for dividends?
Only if you make it. CAGR is arithmetic on two numbers you supply — if the ending value is a share price, you get a price-only CAGR and the dividends have vanished from the record.
That omission is large for US dividend payers. Roughly 40% of the S&P 500's total return since 1926 came from reinvested dividends rather than price appreciation. To get a total-return CAGR, the ending value must include the dividends and whatever they bought — which is exactly what the dividend reinvestment calculator tracks.
Can CAGR be negative?
Yes, whenever the ending value is below the beginning value. $10,000 falling to $7,500 over two years is a CAGR of −13.40% — the constant yearly rate that would have produced that decline.
What it can't handle is a beginning value of zero or a negative ending value. There's no real rate that grows nothing into something, and the formula requires a positive ratio to take a root of. This calculator returns 0% rather than an error when the beginning value is zero, so a 0% CAGR on this page can mean either genuinely flat or an input the formula can't process.
Is CAGR the same as annualized return?
For a single lump sum held from start to finish with nothing added or withdrawn, yes — the terms are used interchangeably, and this calculator's 13.99% would be called either.
They part company as soon as cash moves. If you added $5,000 in year 3, the ending value reflects both performance and your deposit, and CAGR credits the deposit as growth — inflating the rate. The measure built for that case is money-weighted return (IRR), which this page doesn't compute. Fund fact sheets quote time-weighted returns for the same reason: they're measuring the manager, not the investor's deposit schedule.
What CAGR hides by design
CAGR compresses a whole history into one number. That's its purpose and its cost — here's what gets discarded on the way.
- The entire path — Two investments that both went $10,000 → $25,000 in seven years have identical CAGRs. One may have climbed steadily; the other may have tripled, crashed 60%, and recovered. CAGR cannot tell them apart, and no risk measure appears anywhere on this page.
- Contributions and withdrawals — The formula assumes the beginning value is all the money that ever went in. Deposit during the period and the tool reports your own cash as investment growth. For an account you've been funding monthly, this number is not your return.
- Tax and fees — It's a gross, pre-tax figure. A 13.99% CAGR realised in a taxable account is worth less after long-term capital gains tax at 0%, 15% or 20%, plus the 3.8% net investment income tax above $200,000 (single) or $250,000 (married filing jointly). Fund expenses come off before the ending value, so they're at least captured — advisory fees usually aren't.
- Inflation — 13.99% nominal with 3% inflation is a 10.67% real CAGR. Comparing a 1990s CAGR against a 2020s one without adjusting is comparing two different dollars.
- It's backward-looking — A CAGR is a measurement of what happened, not a rate that will continue. Projecting it forward assumes the next seven years resemble the last seven, which is the assumption every fund disclaimer exists to deny.
- ·Standard compound-growth formulas
Rates, brackets and limits here are checked against primary sources. If a number still looks off, email support@realmoneyiq.com and we'll review and fix it.
RealMoneyIQ provides free educational calculators, not financial, tax, investment or legal advice. Results are estimates based on the assumptions you enter and publicly published rates; your actual outcome will differ. Always confirm decisions with a licensed professional who knows your full situation.