What CAGR means
The compound annual growth rate is the single, steady yearly rate that would take your start value to your end value over the given period. Real growth is usually bumpy — up one year, down the next — but CAGR smooths it into one figure, which makes different investments or time periods easy to compare. It always assumes the growth compounds, so each year builds on the last.
Frequently asked questions
How is CAGR different from a simple average return?
A simple average just adds the yearly returns and divides. CAGR accounts for compounding, so it reflects the actual end value — which is why it's the fairer measure for multi-year growth.
Can CAGR be negative?
Yes. If the end value is lower than the start value, CAGR is negative, showing an average yearly decline.
What period should I use?
Use the number of years between the start and end values. For part-years you can enter a decimal, such as 2.5.