CAGR Calculator
Work out the compound annual growth rate of an investment from its starting value, ending value and duration, shown as an annual percentage plus total return, money multiple and a year-by-year growth table.
Growth Trajectory at This CAGR
- It assumes a single lump sum with no money added or withdrawn during the period – regular contributions need a money-weighted return measure such as XIRR instead.
- The year-by-year table shows the smooth path implied by CAGR, not the actual annual ups and downs of your investment.
- The benchmark comparison is a simple compounding projection of your starting value at the rate you enter.
- The results are illustrative and do not account for fees, taxes or inflation unless reflected in the values you enter. This tool is not financial advice.
CAGR Calculator
Our CAGR calculator works out the compound annual growth rate of any investment, lump sum or asset from its starting value, ending value and how long you held it. Enter your figures above to see your annual growth rate, total return and money multiple, with an optional comparison against a benchmark rate such as a savings account.
What Is CAGR?
CAGR stands for compound annual growth rate. It’s the constant annual rate that would grow your starting value into your ending value over the period you held the investment. Because it assumes smooth compounding, it converts messy, up-and-down real-world growth into a single yearly percentage that’s easy to compare across investments, funds, index trackers or property, no matter how long each was held.
The CAGR Formula
CAGR = (Ending Value ÷ Starting Value)1 ÷ Years − 1
For example, an investment that grows from £10,000 to £25,000 over five years has a CAGR of (25,000 ÷ 10,000)^(1÷5) − 1 = 2.50.2 − 1 ≈ 20.11% a year. Check: £10,000 × 1.2011⁵ ≈ £25,000.
CAGR vs Average Annual Return
CAGR is not the same as the simple average of each year’s returns. If an investment gains 50% one year and loses 50% the next, the simple average return is 0% – but £10,000 becomes £15,000, then £7,500, so the CAGR is about −13.4% a year. CAGR captures the effect of compounding that simple averages hide, which is why it’s the standard measure for comparing investments over different periods.
What Counts as a Good CAGR?
There’s no universal benchmark, but as a rough orientation: beating cash savings rates consistently is a reasonable baseline for a cautious investor; over the very long term, global equity markets have historically compounded in the mid-to-high single digits per year before fees and inflation; sustained CAGRs far above that imply higher risk, shorter track records, or both. What matters is comparing like with like – a 15% CAGR over one year tells you much less than a 15% CAGR over a decade.
Limitations of CAGR
- CAGR assumes no money was added or withdrawn during the period. If you made regular contributions, CAGR will overstate your true investment performance – a money-weighted measure such as XIRR is the right tool for that.
- CAGR says nothing about volatility or risk along the way. Two investments can share the same CAGR while one was a smooth ride and the other halved before recovering.
- Short periods can mislead. A strong CAGR over one or two years is rarely predictive of future performance.
- CAGR doesn’t account for fees, taxes or inflation unless those are already reflected in the values you enter.
Frequently Asked Questions
How do I calculate CAGR?
Divide the ending value by the starting value, raise the result to the power of one divided by the number of years, then subtract one. For example, £10,000 growing to £25,000 over 5 years: (25,000 ÷ 10,000)^(1÷5) − 1 ≈ 20.11% a year. The calculator above does this instantly.
Can CAGR be negative?
Yes. If your ending value is lower than your starting value, the CAGR is negative – it simply describes the constant annual rate at which the investment shrank. An investment ending at exactly zero is a 100% loss, which CAGR cannot meaningfully express, so this calculator asks for positive values.
Why is CAGR lower than my simple average annual gain?
Because of compounding. Gains in early years themselves earn returns in later years, and losses in any year must be recovered before you make new ground. A simple average treats every year as independent, so it typically overstates performance compared with the compounded reality that CAGR captures.
Does CAGR account for money I added or withdrew?
No. CAGR assumes a single untouched lump sum from start to finish. If you contributed regularly – for example into a pension or an ISA through monthly investing – your money-weighted return (XIRR) will usually be quite different, because later contributions had less time to grow. Use a money-weighted calculator for situations involving cash flows.
Can I use CAGR for periods shorter than a year?
Yes – express the duration in years as a decimal. An 18-month holding is 1.5 years, and six months is 0.5. Just be aware that annualising very short periods amplifies noise: a 5% gain over a month annualises to roughly 80% CAGR, which says little about long-run performance.