Tell us where you started, where you ended up and how long it took. We’ll give you the steady yearly growth rate that connects the two, plus a chart and a year-by-year table.
Real investments don’t grow by the same amount every year. Some years are great, some are flat, some go backward. That makes it hard to compare one investment with another.
CAGR, the compound annual growth rate, irons out the bumps. It asks a simple question: if this had grown by the exact same percentage every single year, what would that percentage have to be to end up where it did?
Take the ending value EV, the starting value SV and the number of years n:
Measuring in months? Divide by 12 first. Eighteen months is 1.5 years.
Because averages can fool you. Say an investment gains 50% one year and loses 50% the next. The average is 0%, so it sounds like you broke even.
You didn’t. $1 became $1.50, and then half of that is $0.75. You lost a quarter of your money. CAGR catches this. It comes out to −13.40% a year, which matches what really happened to your account.
It’s a great summary, but it only looks at two points: the start and the end. So keep a few things in mind.
The solid green line shows compound growth. Each year’s growth gets added to the pile, and next year’s growth is earned on the bigger pile. That’s why the line curves upward. It always lands exactly on your ending value.
The dashed amber line shows simple growth at the same rate. It earns that same percentage every year, but only ever on the original amount. Nothing gets reinvested, so it’s a straight line.
When the rate is positive, the gap between the two lines is the extra money that reinvesting earned, and it gets wider the longer you wait. When the rate is negative, the picture flips: simple “growth” keeps falling in a straight line, while compound losses slow down as there’s less left to lose. And for periods under a year, the two lines sit almost on top of each other, since compounding hasn’t had time to kick in yet.
You bought $10,000 of a stock five years ago. Today it’s worth $18,500.
That’s about 13.1% a year. To judge whether that’s good, compare it with a relevant index over the same five years.
A software company grew from $500,000 to $4,000,000 in annual recurring revenue over 3 years.
Growing 8 times over in three years means revenue doubled every year. The Revenue Growth Calculator handles monthly and quarterly figures too.
A home bought for $280,000 sells ten years later for $465,000.
That’s just the price. It doesn’t count rent you collected, mortgage interest, taxes or the new roof.
A $10,000 position is worth $8,000 five years later.
A 20% total loss works out to about −4.36% a year. Same formula, just pointing down.
There’s no single answer, because it depends on what you’re measuring and how much risk was involved. The fair test is to compare against something similar over the same dates: a stock against its index, a fund against similar funds, a business against its competitors.
Then ask whether the growth was worth the risk you took to get it.
The average annual return adds up each year’s return and divides by the number of years. It ignores compounding, so whenever returns bounce around, it overstates what you actually earned.
CAGR is the one steady rate that gets you from the real starting value to the real ending value. It tells you what happened overall, though not how bumpy the ride was.
Yes. If you ended with less than you started, CAGR is negative. $10,000 falling to $8,000 over 5 years is −4.36% a year. If the value fell all the way to zero, CAGR is −100%.
Yes. Switch the period to Months and the calculator converts it for you (months ÷ 12). The answer is still a yearly rate. For example, $10,000 growing to $11,500 over 18 months works out to 9.77% a year.
Be careful with anything under a year, though. Stretching a few good months into a yearly rate can make it look better than it is. The Annualized Return Calculator works from exact dates and warns you when the period is short.
CAGR only knows your starting value and ending value. It assumes you didn’t add or withdraw anything in between. IRR, the internal rate of return, accounts for money moving in and out at different times.
If you made one investment and left it alone, the two give you the same answer. If you kept adding money, use IRR, because CAGR on your account balance will make your returns look better than they were.
Regular CAGR finds the growth rate when you know the start and the end. A reverse CAGR calculator works backward: you give it a target, a growth rate and a time frame, and it tells you how much you need to start with. If you want to project forward from what you have now, use the Future Value Calculator.
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