Financial Tool
Compound Annual Growth Rate (CAGR)
Measure the geometric progression ratio that provides a constant rate of return over a time period.
Σ The Formula
CAGR = [(EV / BV)^(1/n)] - 1
Real World Examples
Investment Growh
$10,000 to $16,000 over 5 years → 9.86% CAGR
Real Estate
$300k to $450k over 10 years → 4.14% CAGR
# About This Calculator
The Compound Annual Growth Rate (CAGR) is one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time.
Investors use CAGR to compare two alternative investments. For example, if one investment returned 10% then -5% then 20%, its average return is deceiving. The CAGR provides a "smoothed" annual rate that represents what the investment would have returned if it grew at a steady rate each year.
When to use CAGR
- Mutual Funds: Comparing the historical performance of a fund over 5 or 10 years.
- Business Growth: Tracking revenue or user growth over a multi-year period.
- Portfolio Check: Checking if your retirement account is meeting your 7-8% annual target.
Note: CAGR does not reflect investment risk; it only measures the smoothed historical or projected return.
Frequently Asked Questions
How is CAGR different from Average Return?+
Average return (arithmetic mean) ignores the effects of compounding. CAGR (geometric mean) accounts for the fact that gains or losses in one year change the base for the next year. CAGR is always a more accurate measure of actual wealth generation.
Can CAGR be negative?+
Yes. If the Ending Value is lower than the Beginning Value, the CAGR will be a negative percentage, indicating that your investment lost value at that annual rate.
Does CAGR include dividends?+
CAGR itself is just a math formula (End / Start). If your 'Ending Value' includes reinvested dividends, then yes. If you spent the dividends, then the CAGR only reflects price appreciation.
Is Compound Annual Growth Rate (CAGR) free to use?+
Yes, Compound Annual Growth Rate (CAGR) on Matheric is completely free to use. We believe in accessible education and utility for everyone.
How accurate is Compound Annual Growth Rate (CAGR)?+
We use standard mathematical formulas and high-precision computing algorithms to ensure results for Compound Annual Growth Rate (CAGR) are accurate for academic and professional use.
Can I use Compound Annual Growth Rate (CAGR) on my phone?+
Yes! Compound Annual Growth Rate (CAGR) is fully responsive and optimized for all devices, including smartphones, tablets, and desktops.