Understanding CAGR

The Compound Annual Growth Rate (CAGR) is the rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each year of the investment’s lifespan.

Why Use This Calculator?

CAGR is one of the most accurate ways to measure the performance of an investment over time because it smooths out the volatility of returns. It gives you a single, representative growth number that is easy to compare across different investments.

The Formula

CAGR is calculated with the following formula:

CAGR = [(Ending Value / Beginning Value)^(1 / N)] - 1

• Ending Value = The value of the investment at the end of the period.
• Beginning Value = The value of the investment at the start of the period.
• N = The number of years.