📈 CAGR Calculator
Calculate the Compound Annual Growth Rate (CAGR) for your investments, stock portfolios, real estate, or business revenues over any time period.
| Year | Starting Value | Annual Growth Rate | Yearly Increase | Ending Value |
|---|
What is CAGR (Compound Annual Growth Rate)?
The Compound Annual Growth Rate (CAGR) is the annualized rate of geometric growth that provides a smooth, constant rate of return over a specified time period longer than one year. It represents the rate at which an investment would have grown if it had grown at a steady annual rate with all profits reinvested.
CAGR = ( ( Ending Value ÷ Beginning Value ) ^ ( 1 ÷ Number of Years ) ) − 1Total Absolute Return Formula:
Total Return (%) = [ ( Ending Value − Beginning Value ) ÷ Beginning Value ] × 100
Why CAGR is Better Than Average Annual Return
Calculating a simple average (arithmetic mean) of annual investment returns can be misleading due to market volatility. Consider this classic example:
| Year | Portfolio Value | Annual Return (%) |
|---|---|---|
| Start (Year 0) | $100,000 | — |
| Year 1 | $200,000 | +100% |
| Year 2 | $100,000 | −50% |
If you take the simple average return: (+100% − 50%) ÷ 2 = +25% per year. However, your money went from $100K to $200K and back to $100K — you made $0 net profit. The actual CAGR is 0.0%, which accurately reflects the true financial reality.
CAGR Benchmarks for Common Asset Classes
Here are typical long-term historical CAGR benchmarks across popular asset classes over 10 to 30-year periods:
| Asset Class | Historical CAGR (Nominal) | Historical CAGR (Inflation-Adjusted) |
|---|---|---|
| S&P 500 Index (US Stocks) | ~10.0% | ~7.0% |
| NASDAQ 100 (Tech Growth Stocks) | ~13.5% | ~10.5% |
| US Residential Real Estate | ~4.5% – 5.5% | ~1.5% – 2.5% |
| US 10-Year Treasury Bonds | ~4.0% – 5.0% | ~1.0% – 2.0% |
| High-Yield Corporate Bonds | ~6.0% – 7.0% | ~3.0% – 4.0% |
| Gold | ~5.5% – 6.5% | ~2.5% – 3.5% |
Limitations of CAGR
- Ignores Volatility: CAGR assumes smooth, constant growth every year. It hides dramatic market drawdowns that occurred during the holding period.
- Does Not Account for Cash Inflows/Outflows: CAGR assumes no money was added or withdrawn during the timeframe. If you make monthly deposits, use Internal Rate of Return (IRR) or Money-Weighted Rate of Return (MWRR) instead.
- Sensitivity to Start/End Dates: Choosing a starting year at a market bottom and an ending year at a peak will artificially inflate the CAGR.
Frequently Asked Questions
CAGR measures the rate of return between a single starting value and a single ending value over time, assuming no intermediate cash additions or withdrawals. IRR (Internal Rate of Return) accounts for complex multiple cash inflows and outflows occurring at different dates throughout the investment period.
You can calculate CAGR in Excel using the formula: =(End_Value / Start_Value)^(1 / Years) - 1, or by using the built-in function =RRI(Years, Start_Value, End_Value).
For established businesses, a revenue or profit CAGR of 10% to 15% is considered strong. High-growth startups or tech companies often target CAGRs of 20% to 50%+ during their scaling phases.
Yes. If the final ending value is lower than the initial starting value, the calculated CAGR will be negative, representing the annualized percentage loss over the time period.
Last updated: January 2026 | Reviewed by: CalcMyMoney Editorial Team