CAGR (compound annual growth rate) tells you the steady yearly rate at which something grew from its starting value to its ending value. Use it to compare investments, funds, sales or prices fairly.
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CAGR formula
CAGR = (ending value ÷ starting value)1 ÷ years − 1. An investment that grew from 10,000 to 20,000 in 5 years has a CAGR of 14.87%, even though the total return is 100%.
Frequently asked questions
What is the difference between CAGR and absolute return?
Absolute return is the total growth over the whole period. CAGR spreads that growth into an equal yearly rate, which makes periods of different lengths comparable.
Is CAGR the same as average return?
No. A simple average of yearly returns ignores compounding and usually overstates growth. CAGR is the more accurate measure. To project growth forward, use the lumpsum calculator.