CAGR Calculator
The compound annual growth rate (CAGR) is the single steady yearly rate that would carry a beginning value to an ending value over a set number of years — the smoothed average of a journey that was rarely smooth. It describes only the two endpoints: the same CAGR can come from a calm climb or from a round-trip through a deep drawdown, so it tells you how fast money grew, never how rough the ride was.
CAGR = (ending value ÷ beginning value)^(1 ÷ years) − 1. The first part is the total growth multiple over the whole period; raising it to one-over-the-number-of-years spreads that growth evenly across each year, and subtracting one turns the multiple back into an annual percentage.
Worked example: A $10,000 stake that becomes $20,000 over five years is a 2× multiple, so CAGR = 2^(1 ÷ 5) − 1 ≈ 0.1487, about 14.87% a year. The money doubled — but the rate is silent on whether it climbed steadily or first fell 40% and clawed back.
CAGR collapses a whole path into one rate, so it hides every losing year and drawdown between the endpoints and says nothing about the risk taken to earn it. Educational tool, not advice.
CAGR smooths a bumpy path into one number: it says nothing about the drawdowns along the way or the order the returns arrived in. Two investments with the same CAGR can feel completely different to live through — and none of it predicts the future.
Read CAGR as how fast, not how safe: it keeps only the two endpoints, so a gentle climb and a terrifying round-trip can post the very same rate. A worst-drawdown figure and the year-by-year returns are what fill in the ride it leaves out — and a backward-looking rate measured over one chosen span is a record of the past, not a forecast of the next years.
How is CAGR calculated from a beginning and ending value?
Divide the ending value by the beginning value for the total growth multiple, raise that to the power of one divided by the number of years, and subtract one. Ten thousand growing to twenty thousand over five years is a 2× multiple, which comes to about 14.87% a year — the steady rate that links the two endpoints.
What does CAGR leave out about an investment?
The entire path between the start and the end. Because it spreads all the growth evenly across the years, two results with the same CAGR can have felt nothing alike — one drifting up quietly, the other doubling only after halving first — so the figure reports the speed of the trip and nothing about its roughness, its worst year, or the risk run to earn it.
Why can a high CAGR still mislead?
Because it is an average looking backward over one chosen window. A short or well-picked span can show a flattering rate that reveals nothing about the drawdowns survived or whether the next years will look anything like the last, and a rate drawn from survivors alone — the assets that lasted — runs higher than the full field that was there to choose from at the start.
A free, interactive calculator for any blog, newsletter or forum — same numbers as here, and it links back.
<iframe src="https://stratsemble.com/embed/tools/cagr-calculator" width="460" height="410" style="border:0;border-radius:12px;max-width:100%" loading="lazy" title="CAGR calculator — Stratsemble"></iframe>A calculator shows what a rule should do on paper. A backtest is how you find the rare few that actually beat simply buying and holding — costs on, losses shown, no look-ahead — so when you build one that survives, you'll know it isn't a fake edge, and can prove it forward before you risk real money. It won't tell you you'll win — nothing honest can.