# What is the CAGR of my investment?

Computes the compound annual growth rate (CAGR) between a start and an end value over a period, or solves for the start, end, or period.

- Page: https://www.acalculator.org/finance/cagr-calculator
- JSON spec: https://www.acalculator.org/finance/cagr-calculator.json
- Version: 7be490b6dbf4

## Default answer

Example with the default inputs (Start value $1,000.00, End value $2,000.00, Period 5, Period in years): Going from $1,000.00 to $2,000.00 over 5 years is a compound annual growth rate of 14.87%.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| startValue | Start value | The value at the start of the period. |
| endValue | End value | The value at the end of the period. |
| period | Period | The length of the period, in years or months (see the unit). |
| cagr | CAGR | The compound annual growth rate: the steady yearly rate that turns the start value into the end value. |
| periodUnit | Period in | Whether the period is in years or in months. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| start | Start value | The value at the start of the period. |
| end | End value | The value at the end of the period. |
| period | Period | The length of the period, in the unit chosen under “Period in”. |
| cagr | CAGR | The compound annual growth rate: the steady yearly rate that turns the start value into the end value. |
| change | Total change | The end value minus the start value. |
| changePercent | Total change (%) | The total change divided by the start value, as a percent. |

## Method

CAGR = (End ÷ Start)^(1/n) − 1, where n is the period in years (months ÷ 12).

## Assumptions

- Growth is the same every year and compounds once a year; part years use the same power.
- A period in months is months ÷ 12 years.
- Money added or taken out during the period is not included; only the start and end values count.

## Worked examples

1. startValue = $1,000.00, endValue = $2,000.00, period = 5, periodUnit = years gives cagr = 14.869835%, change = $1,000.00, changePercent = 100%. Source: The compound growth formula A = P(1 + r)^n (SEC Investor.gov) solved for r: (End ÷ Start)^(1/n) − 1.
2. startValue = $5,000.00, endValue = $4,000.00, period = 3, periodUnit = years gives cagr = -7.168223%, changePercent = -20%.
3. startValue = $1,000.00, endValue = $1,500.00, period = 18, periodUnit = months gives cagr = 31.03707%.
4. startValue = $1,000.00, endValue = $2,000.00, cagr = 10%, periodUnit = years gives period = 7.272541.
5. startValue = $1,000.00, cagr = 10%, period = 3, periodUnit = years gives endValue = $1,331.00.
6. startValue = $1,000.00, endValue = $1,250.00, period = 1, periodUnit = months gives cagr = 1,355.191523%, changePercent = 25%.
7. endValue = $1,331.00, cagr = 10%, period = 3, periodUnit = years gives startValue = $1,000.00.

## FAQ

### What is CAGR (Compound Annual Growth Rate)?

CAGR is a measure of the mean annual growth rate of an investment over a specified period longer than one year. It represents 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 life span.

### How is CAGR calculated?

CAGR is calculated using the formula: CAGR = (End Value / Start Value)^(1/n) - 1, where n is the number of years. This formula assumes that the growth rate is constant over the entire period and that all profits are reinvested.

### What's the difference between CAGR and average annual return?

CAGR provides a smoothed annual rate that eliminates the volatility of periodic returns that can render arithmetic means irrelevant. Unlike average annual return, CAGR accounts for the compounding effect and provides a more accurate representation of investment performance over time.

### When should I use CAGR?

CAGR is useful for comparing investments over different time periods, analyzing business growth rates, evaluating investment performance, and making long-term financial projections. It's particularly valuable when comparing investments with different time horizons.

### What are the limitations of CAGR?

CAGR assumes a constant growth rate over the entire period, which rarely happens in reality. It doesn't account for volatility, risk, or the timing of cash flows. CAGR also doesn't reflect the actual year-by-year performance, only the average annual growth rate.

### Can CAGR be negative?

Yes, CAGR can be negative if the end value is less than the start value. A negative CAGR indicates that the investment or metric has decreased over the specified period, representing a loss rather than growth.

### How do I interpret CAGR results?

A higher CAGR indicates faster growth. For example, a CAGR of 10% means the value grew by an average of 10% per year. Compare CAGR to benchmarks like market indices, inflation rates, or other investments to assess relative performance.

### What's the difference between months and years in CAGR calculation?

When using months, the calculator automatically converts the period to years by dividing by 12. This allows for more precise calculations when dealing with periods shorter than a year. The CAGR formula always uses years as the time unit.

### How accurate is CAGR for investment analysis?

CAGR provides a useful snapshot of average annual growth but should be used alongside other metrics like volatility, Sharpe ratio, and maximum drawdown for comprehensive investment analysis. It's best for comparing investments over similar time periods.

### Can I use CAGR for non-financial metrics?

Yes, CAGR can be applied to any metric that changes over time, such as revenue growth, user growth, market share, or any other business or economic indicator that you want to analyze for consistent growth patterns.

## Sources

- U.S. Securities and Exchange Commission, Investor.gov compound interest formula A = P(1 + r)^n. https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
- Geometric mean rate of return: S. A. Broverman, Mathematics of Investment and Credit, chapter 1.