Calculate Compound Annual Growth Rate for investments and analyze returns
CAGR (Compound Annual Growth Rate) is the mean annual growth rate of an investment over a specified time period longer than one year. It represents one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time.
Formula:
CAGR = ((Ending Value / Beginning Value)^(1/Years) - 1) × 100
Example for 3 years: If you want to calculate CAGR for 3 years, you need the value at the start of Year 1 and the value at the end of Year 3 (start of Year 4). Enter your Beginning Value (Year 1), Ending Value (Year 4), and Years = 3. The calculator will compute: CAGR = ((Ending Value / Beginning Value)^(1/3) - 1) × 100
When to use CAGR: CAGR is useful when comparing investments with different time periods or when you want to understand the average annual return of an investment. It smooths out volatility and provides a single growth rate.
Common benchmarks: The S&P 500 has historically averaged around 10% CAGR over long periods. A CAGR above 15% is considered excellent, while anything above 20% is exceptional.