What is CAGR?

CAGR (Compound Annual Growth Rate) represents the smoothed annual growth rate of your ***, eliminating the noise from yearly ups and downs. Think of it as your portfolio’s “average speedometer” over the entire period.

Why CAGR Matters

• A $10,000 *** growing to $20,000 in 5 years has a CAGR of 14.87%, even if the annual returns fluctuated dramatically.
• Unlike simple total returns, CAGR allows fair comparisons between stocks, mutual funds, or business revenues across varying timeframes.

How to Use This CAGR Calculator

1. Enter your values:
   • Initial *** (e.g., $10,000)
   • Final value (e.g., $25,000)
   • *** duration in years (e.g., 7 years)
2. Get your CAGR percentage and view a growth chart instantly.

CAGR Formula & How to Calculate Manually

CAGR converts irregular *** growth into a consistent annual rate:

CAGR=(Final ValueInitial Value)1Years−1\text{CAGR} = \left(\frac{\text{Final Value}}{\text{Initial Value}}\right)^{\frac{1}{\text{Years}}} - 1CAGR=(Initial ValueFinal Value​)Years1​−1

Example:

• Initial Value = $5,000
• Final Value = $12,000
• Duration = 6 years

CAGR=(12,0005,000)16−1=15.10%\text{CAGR} = \left(\frac{12,000}{5,000}\right)^{\frac{1}{6}} - 1 = 15.10\%CAGR=(5,00012,000​)61​−1=15.10%

Excel shortcut:
=((FV/IV)^(1/n))-1

CAGR vs. Other Growth Metrics

Real-World CAGR Examples

Case 1: Stocks vs. Mutual Funds

• Stock A: $8,000 → $22,000 in 10 years → 10.66% CAGR
• Fund B: $8,000 → $18,000 in 10 years → 8.45% CAGR

Key insight: Higher absolute returns don’t always mean a higher CAGR.

[Calculate Mutual Fund CAGR Here]

Case 2: Business Revenue Growth
A startup’s revenue grows from $200K in Year 1 to $1.2M in Year 5, with a CAGR of 43.09% — even if some years saw declines.

Limitations of CAGR

⚠️ Use CAGR carefully when:

• *** volatility matters (e.g., a 50% loss followed by a 50% gain ≠ 0% CAGR)
• There are cash flows (deposits or withdrawals) during the period — XIRR is better here
• The time horizon is very short (1-2 years), as outliers can distort results

FAQ: Quick Answers

Q: Is CAGR the same as ROI?
A: No, ROI shows total return over time; CAGR annualizes that return.

Q: Can CAGR be negative?
A: Yes. For example, a drop from $10,000 to $7,000 over 3 years results in a -10.06% CAGR.

Q: What’s a good CAGR for stocks?
A: Historically, the market averages about 8-10% CAGR annually.