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About the CAGR Calculator
Absolute return is a useless comparison tool: 150% over five years and 150% over twelve are wildly different investments. CAGR converts any gain into the constant annual rate that would have produced it, which makes anything comparable with anything.
It has one blind spot worth remembering. CAGR describes only the start and end points, so an investment that fell 50% and then tripled shows the same CAGR as one that rose steadily. It measures outcome, not risk.
The formula
For an investment with additions along the way, CAGR is the wrong measure — use XIRR instead.
Things worth knowing
Frequently asked questions
CAGR = [(Final value ÷ Initial value)^(1 ÷ number of years) − 1] × 100. It gives the constant annual growth rate that would take you from the starting value to the ending value.
Absolute return is the total percentage gain regardless of time. CAGR annualises it, which is the only way to compare investments held for different periods.
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