What Is CAGR?

CAGR (Compound Annual Growth Rate) is the rate at which an investment, revenue, or metric would have grown if it had grown at a steady, compounded rate each year over a specified time period. It represents the smoothed average annual growth rate — eliminating the noise of volatile year-to-year fluctuations to show the underlying trend.

CAGR is ubiquitous in finance and business: analysts use it to compare investments across different asset classes, CEOs cite it in earnings calls to benchmark revenue growth against peers, and individual investors use it to evaluate whether their portfolio is outperforming the S&P 500. Use the CAGR calculator above to compute the compound growth rate between any two values over any time period.

📊

Investment Performance

Investors use CAGR to measure portfolio returns: a $10,000 investment that became $25,937 in 10 years has a CAGR of 10.0% — matching the S&P 500 historical average. Without CAGR, volatile year-to-year returns make it nearly impossible to compare strategies.

🏢

Business Revenue Growth

Companies include CAGR in investor presentations to show revenue or earnings growth trends. A SaaS company with $1M ARR in 2019 and $5M in 2024 has a revenue CAGR of 37.97% — a compelling growth narrative for investors evaluating the business.

🎯

Goal Planning

Use CAGR in reverse: if you want $1,000,000 in 20 years starting with $100,000, you need a 12.2% CAGR. This reverse-engineering approach helps you select investment vehicles, set savings targets, and make realistic financial projections.

CAGR calculator infographic showing compound growth curve vs linear growth, CAGR formula with worked example $10,000 to $25,000 in 5 years = 20.1% CAGR, and benchmark CAGR comparison table for S&P 500, bonds, real estate, gold, and inflation

Compound growth (CAGR) dramatically outpaces linear growth over time. See benchmark comparison table →

CAGR Formula Explained

Three formulas power all CAGR calculations: the core CAGR formula, its inverse for computing future value, and the logarithm-based formula for calculating how many years are required to reach a target.

① CAGR Formula

CAGR = 1/n(EVBV)1/n − 1

Variable	Meaning	Example
CAGR	Compound Annual Growth Rate (the result)	→ 9.60% per year
EV	Ending Value (final period value)	$25,000
BV	Beginning Value (starting period value)	$10,000
n	Number of years in the period	10 years

Worked example: $10,000 → $25,000 in 10 years:
CAGR = (25,000 / 10,000)^1/10 − 1 = 2.5^0.1 − 1 = 1.09648 − 1 = 9.60%/year

② Future Value Formula (CAGR Inverse)

FV = BV × (1 + CAGR)ⁿ

Example: $10,000 at 10% CAGR for 20 years:
FV = $10,000 × (1.10)²⁰ = $10,000 × 6.7275 = $67,275
This is the power of compound growth: $10,000 becomes $67,275 — a 573% gain.

③ Years to Reach Target

n = ln(EV / BV)ln(1 + CAGR)

Example: Growing $10,000 to $100,000 at 10% CAGR:
n = ln(10) / ln(1.10) = 2.3026 / 0.09531 = 24.16 years

④ Rule of 72 (Doubling Time Shortcut)

Years to Double ≈ 72CAGR (%)

Mental math shortcut: At 10% CAGR → doubles in 72/10 = 7.2 years.
At 8% CAGR → 9 years. At 12% → 6 years. At 6% → 12 years. At 3.5% (inflation) → 20.6 years.
The exact formula is Years = ln(2)/ln(1+CAGR). Rule of 72 is accurate within 0.4 years for rates between 2–20%.

CAGR Benchmark Reference Table

Historical CAGR benchmarks by asset class for $10,000 invested in 2004 (20-year horizon). Use the Compare Rates mode to run any custom comparison against these benchmarks.

Asset Class	~CAGR	$10K → 10yr	$10K → 20yr	$10K → 30yr	Doubles in	Notes
S&P 500 Index	10.5%	$27,141	$73,664	$199,936	7.0 yrs	Historical (dividends reinvested), pre-tax
NASDAQ Composite	11.8%	$30,478	$92,891	$283,062	6.2 yrs	Higher growth + volatility vs S&P
Total World Stock	8.5%	$22,610	$51,120	$115,583	8.5 yrs	Global diversification, lower volatility
US Real Estate (REITs)	8.0%	$21,589	$46,610	$100,627	9.0 yrs	Inflation hedge, income component
Gold	7.8%	$21,072	$44,402	$93,572	9.3 yrs	Volatile; no yield; inflation hedge
US Aggregate Bonds	4.0%	$14,802	$21,911	$32,434	18.0 yrs	Lower risk; income; rate-sensitive
Treasury Bills	2.5%	$12,801	$16,386	$20,976	28.8 yrs	Near risk-free; tracks Fed Funds rate
US CPI Inflation	3.5%	$14,106	$19,898	$28,068	20.6 yrs	Purchasing power erosion benchmark
High-Yield Savings	4.5%	$15,530	$24,117	$37,453	16.0 yrs	As of 2024; varies with Fed policy

5 Key Uses of CAGR in Finance and Business

01

Evaluating Investment Returns

CAGR is the standard for comparing investment performance. When an advisor says "this fund returned 12.3% annually over the past 10 years," they mean CAGR. It eliminates the misleading effect of taking the simple average of annual returns (the AAGR), which overstates performance in volatile markets.

02

Corporate Revenue Growth Analysis

In earnings reports and pitch decks, companies report revenue CAGR as the headline growth metric. A SaaS company at 35% revenue CAGR signals hypergrowth. A consumer staples company at 5% CAGR signals stability. The 3-year and 5-year CAGR are the most commonly cited periods in investor relations materials.

03

Comparing Mutually Exclusive Investments

When choosing between two investments over different time horizons with different starting/ending values, CAGR provides the apples-to-apples comparison. Compare the CAGR of starting a business ($100K → $850K in 7 years = 36.3%) vs an index fund ($100K → $271K in 10 years = 10.5%) to make rational capital allocation decisions.

04

Technology Adoption & Market Projections

Market research reports ($3,500 each from research firms) always lead with CAGR. "The global AI market will grow at a 36.6% CAGR through 2030" means the market size compounds at that rate each year. These projections help VCs, strategists, and corporate planners assess entry timing and TAM expansion.

05

Personal Financial Goal Reverse-Engineering

The most powerful personal finance use of CAGR: work backward from your goal. Target $2M in 25 years with $100K today? Required CAGR = (2,000,000/100,000)^(1/25) − 1 = 13.1%/yr — above S&P 500 historical, requiring either superior stock selection or leverage. This tells you immediately whether your goal is realistic.

CAGR vs IRR, AAGR, and ROI

These four metrics are often confused. Each measures "return" differently and is appropriate for different scenarios:

Metric	Definition	Best For	Limitation
CAGR	Steady-state annual growth from start to end value	Long-term investment comparison, business revenue trends	Ignores volatility, dividends, intermediate cash flows
IRR (Internal Rate of Return)	Discount rate making NPV of all cash flows = 0	Private equity, real estate with multiple cash flows, project finance	Assumes reinvestment at IRR; multiple solutions possible
AAGR (Arithmetic Average)	Simple average of annual returns	Quick historical summary	Overstates performance; misleading with volatile returns
ROI (Return on Investment)	Total return as % of initial investment (not annualized)	One-time project evaluation, marketing campaigns	Not annualized; misleading across different time periods
TWR (Time-Weighted Return)	Return that eliminates effect of external cash flows	Evaluating fund manager skill independent of investor timing	Complex to compute; not useful for personal investing

The Rule of 72 and Doubling Time

The Rule of 72 is one of the most powerful mental math shortcuts in finance. Divide 72 by your CAGR percentage to estimate how many years it takes for an investment to double. This is derived from the exact formula ln(2)/ln(1+r) but is remarkably accurate for rates between 2% and 20%.

CAGR	Rule of 72 (approx)	Exact Doubling Years	$10K → 2× in	Context
2%	36.0 yrs	35.0 yrs	~2035	Long-term T-Bills, conservative savings
3.5%	20.6 yrs	20.1 yrs	~2045	US Inflation rate — your purchasing power halves in 20 years
5%	14.4 yrs	14.2 yrs	~2039	Conservative balanced portfolio
7%	10.3 yrs	10.2 yrs	~2034	General "real return" assumption; often used in retirement planning
10%	7.2 yrs	7.27 yrs	~2032	S&P 500 historical average (nominal)
12%	6.0 yrs	6.12 yrs	~2031	Aggressive equity; small-cap premium
15%	4.8 yrs	4.96 yrs	~2030	Exceptional stock picker / early-stage VC
20%	3.6 yrs	3.80 yrs	~2028	Venture capital target; growth-stage startups
25%	2.9 yrs	3.11 yrs	~2028	High-growth SaaS / early crypto bull market

Frequently Asked Questions

How do I calculate CAGR?

CAGR = (Ending Value / Beginning Value)^(1/n) − 1, where n is the number of years. Example: $10,000 → $25,000 in 10 years: CAGR = (25,000/10,000)^(1/10) − 1 = 2.5^0.1 − 1 = 0.0960 = 9.60%/year. The calculator above handles all variations including fractional years and reverse calculations.

What is a good CAGR for an investment?

Context is everything. For public equity portfolios, a CAGR above the S&P 500 historical average (~10.5%) is considered excellent. For a SaaS startup, investors typically want 3× ARR growth (200%+ CAGR). For a mature business, 5–10% revenue CAGR signals steady health. Compare against the relevant benchmark (use the Compare Rates mode above).

What is the difference between CAGR and annual return?

Annual return is the percentage change in any single year. CAGR is the smoothed average that tells you what consistent rate would have produced the same start-to-end result. Example: a stock returns +50%, −33%, +50% over 3 years. AAGR (arithmetic average) = +22.3%. But the actual result ($1,000 → $1,500 → $1,004 → $1,506) gives CAGR = (1,506/1,000)^(1/3)−1 = 14.7% — very different from 22.3%.

How do I use CAGR to calculate future investment value?

Future Value = Beginning Value × (1 + CAGR)^n. Example: $50,000 at 10% CAGR for 25 years = $50,000 × (1.10)^25 = $50,000 × 10.835 = $541,735. Use Mode 2 (Future Value) in the calculator above — enter your starting amount, expected CAGR, and time horizon to see the projected value and year-by-year growth table.

Can CAGR be negative?

Yes. A negative CAGR indicates the investment lost value over the period. Example: $100,000 → $60,000 in 5 years: CAGR = (60,000/100,000)^(1/5) − 1 = 0.6^0.2 − 1 = −9.45%/year. Negative CAGR is common for individual stocks, sector funds during bear markets, or commodities. The S&P 500 lost value over 10-year periods starting in 1929 (−1.7%/yr) and 1999 (−0.5%/yr).

What is the CAGR of the S&P 500?

The historical CAGR of the S&P 500 from 1926 to 2023 is approximately 10.3% nominally (including dividends reinvested, before taxes and fees). Adjusted for inflation (~3.5% CPI), the real CAGR is approximately 6.8%. Over the past 20 years (2004–2023), the S&P 500 delivered a CAGR of approximately 10.2% nominal. Individual 20-year periods ranged from 5.6% (worst) to 18.3% (best).

Use the CAGR Calculator with these tools for complete investment analysis:

Compound Interest Calculator →
While CAGR measures the rate of growth, the compound interest calculator shows the effect of periodic contributions. Both use the same exponential math — compound interest adds the power of regular investments to a CAGR-driven return.
Investment Calculator →
Model an investment portfolio with monthly contributions, different asset allocation CAGRs, and time horizons. The investment calculator applies your CAGR to project wealth accumulation toward retirement or financial independence.
APY Calculator →
APY (Annual Percentage Yield) is CAGR for bank accounts and bonds: it accounts for compounding frequency within a year. A savings account with 4.8% APR compounded monthly actually yields 4.91% APY — effectively a 4.91% 1-year CAGR.
Profit Margin Calculator →
For business owners, combine CAGR analysis with profit margin trends. Revenue CAGR of 25% with shrinking margin tells a very different story than 15% revenue CAGR with expanding margin — use both together for a complete business health picture.
Annual Income Calculator →
A consistent savings rate on your annual income, invested at a specific CAGR, is the engine of wealth building. Calculate your annual income, determine a savings rate, then model CAGR growth in the compound interest calculator.
Percentage Discount Calculator →
Understand how inflation (the negative CAGR on purchasing power) erodes discounts and real returns over time. A 10% discount today has different real value than a 10% discount in 10 years with 3.5% annual inflation eroding purchasing power.