How to calculate CAGR
CAGR = (Ending Value ÷ Beginning Value)^(1 ÷ Years) − 1 Example: ($20,000 ÷ $10,000)^(1÷5) − 1 = 14.87% CAGR answers a specific question: "what single, steady annual growth rate would have taken the initial value to the final value over this exact period?" It's not the same as averaging each year's individual return — a value that grows 100% one year and falls 50% the next has averaged 25% per year by simple math, but its real CAGR is 0%, since it ended up exactly where it started. CAGR reflects what actually happened to the money, not the average of the yearly swings along the way.
Why this calculator uses dates instead of asking for a number of years
Typing in a whole number of years, silently rounding away everything else. That rounding isn't free — a period of 5 years and 3 months typed in as just "5" understates the actual timespan by about 5%, which shows up directly in the result. Entering the actual start and end dates instead lets the calculator compute the precise elapsed time (down to the day) and annualize against that, rather than an approximation. Even two dates that both happen to be "about 5 years" apart can differ slightly depending on where leap years fall within that span — this calculator uses the actual calendar span every time, not an idealized round number.
The exact period is annualized using the standard convention of 365.25 days per year (the average length of a year accounting for leap years), the same convention used across most financial CAGR tools.
Working backwards: what return do you actually need?
The Calculate CAGR tab looks backwards, at something that already happened. The Required CAGR tab asks the opposite, forward-looking question that comes up just as often in practice: "I have this much now, I want this much by some point in the future — what annual return do I actually need to get there?" It's the exact same formula, just answering a planning question instead of a historical one, which is why it takes a plain number of years instead of two dates — a goal that hasn't happened yet doesn't have a start and end date to measure.
$10,000 today, $50,000 goal, 10 years Required CAGR = (50,000 ÷ 10,000)^(1÷10) − 1 = 17.46% Frequently asked questions
What is CAGR?
Compound Annual Growth Rate — the single steady annual rate that would take an investment from its starting value to its ending value over a given period, smoothing out whatever happened year to year along the way.
How do I calculate compound annual growth rate?
Divide the final value by the initial value, raise the result to the power of 1 divided by the number of years, then subtract 1. $10,000 growing to $20,000 over 5 years gives a CAGR of about 14.87%.
Is CAGR the same as average annual return?
No. A simple average of each year's percentage return can be misleadingly high, since it doesn't account for compounding — a 100% gain followed by a 50% loss averages to +25% per year, but leaves you exactly where you started, a true CAGR of 0%.
What annual return do I need to reach my investment goal?
Use the Required CAGR tab: enter what you're starting with, your target value, and how many years you have. $10,000 growing to a $50,000 goal over 10 years requires a 17.46% annual return.