Calculate your investment’s Compound Annual Growth Rate (CAGR) with ease. Includes a year-by-year growth table and interactive chart to visualize your long-term returns.
| Year | Value ($) | Total Increase |
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This calculation is based on widely-accepted formulas for educational purposes only, and it is not a recommendation for how to handle your finances. Consult with a financial professional before making financial decisions.
What is CAGR and Why Does It Matter?
The Compound Annual Growth Rate (CAGR) is one of the most accurate ways to calculate the return on an investment that rises and falls in value over time. Unlike a simple average, CAGR provides a “smoothed” rate of return, telling you what your investment would have earned if it grew at a steady rate each year.
How to Use the CAGR Formula
To calculate CAGR manually, you need three pieces of data: the beginning value, the ending value, and the time period in years. The mathematical formula is:
Example:
If you invested $1,000 and it grew to $2,500 over 5 years, your CAGR would be approximately 20.11%. This means your money grew by an average of 20.11% every single year.
Comparison of Compounding Frequencies
The frequency with which your interest “compounds” can change your final outcome. Our calculator supports multiple compounding methods:
| Frequency | Description |
| Annually | Interest is calculated once at the end of the year. |
| Quarterly | Common for dividend-paying stocks and savings accounts. |
| Monthly | Often used for credit cards and personal loans. |
| Continuous | Theoretical compounding that happens every second (using e). |
Frequently Asked Questions (FAQ Accordion Content)
The Compound Annual Growth Rate is calculated using the following mathematical formula:
Where $V_{end}$ is the ending value, $V_{start}$ is the beginning value, and $t$ is the time in years.
No. An average return can be misleading because it doesn’t account for the sequence of returns or compounding. For instance, if an investment loses 50% in year one and gains 50% in year two, the average return is 0%, but the CAGR is actually -13.4% because you haven’t recovered your initial capital.
Continuous compounding is the mathematical limit that compounding can reach. It assumes interest is added to the balance at every possible infinitesimal moment. The formula involves the constant $e$:
CAGR is the best “apples-to-apples” comparison for different investments. It allows you to compare the performance of a volatile asset (like a stock) against a steady asset (like a bond) by looking at their smoothed annual growth over the same period.