CAGR Calculator

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Number of Years

Starting Value

Ending Value

Simple Growth Rate

CAGR

Understanding CAGR

We talk about CAGR a lot on this site when discussing portfolios or ETFs or any other investment assets.

CAGR stands for Compound Annual Growth Rate.


It is a number that makes it easy to summarize and understand investment’s performance. It is not a true return but a representational figure. It is used to compare returns and smooths out any volatility within the the period. If you are interested in a more mathematical explanation check out Geometric Progression.


Why is this useful?

Let’s say we are comparing two investment opportunities by looking at their historical returns. Let’s say over the last 5 years, these two investments had completely different returns. Best way to summarize their performance is with one hypothetical number. Since we know the beginning and ending value of our hypothetical investment, we can summarize it with an annual growth number. In other words if our investments grew at a steady number each year, what would that number be to produce the return that it actually produced.