What was the annual growth rate?
Enter a start value, an end value and the years between them. Get the single steady rate that actually explains the gap — not the average of the yearly returns, which reads higher.
What it was worth at the beginning.
What it is worth now, or was worth at the end.
Steady annual rate from $10,000 to $20,000 over 10 years
7.2%
Growing from $10,000 to $20,000 over 10 years is the same as compounding at a steady 7.2% a year, every single year. That is what CAGR measures — not what actually happened along the way, which almost certainly moved around more than that.
- CAGR
- 7.2%
- Total growth
- 2.00×
- Total return over the period
- +100%
This is not a forecast — it is the smooth curve CAGR implies, drawn backwards from the answer. The real path from $10,000 to $20,000 almost certainly was not this smooth; CAGR only ever sees the two endpoints.
Why not just average the yearly returns?
Because the arithmetic average reads too high whenever a return varies from year to year, and it is not a small effect. Take a fund that rises 50% in year one, then falls 50% in year two. The arithmetic average of those two numbers is 0% — which reads as though nothing happened.
What actually happened to the money: $10,000 becomes $15,000 after the rise, then $7,500 after the fall — a 25% loss overall, not a wash. The steady annual rate that actually produces that outcome is -13.4%, not 0%. Averaging returns and compounding them are different operations, and only the second one describes what happened to the money.
What CAGR actually is
CAGR stands for compound annual growth rate. It answers one specific question: what single, unchanging rate — applied every year with no good years and no bad ones — would turn a start value into an end value over a given number of years? It is not a measurement of what happened each year along the way, and it is not a prediction of what happens next. It is a summary of two numbers and a span of time, nothing more.
That makes it a useful way to compare two investments, or two periods, on equal terms, because it strips out the shape of the path and leaves only the destination. It also makes it easy to misread as smoother or steadier than the real thing ever was — see below.
Why it is not the average of the yearly returns
The instinctive way to summarise a set of yearly returns is to average them: add them up, divide by how many there are. That arithmetic mean is the wrong answer to "what steady rate got me here", and it is wrong in a specific, one-directional way — it always reads at or above the true compound rate, never below.
The reason is that returns compound multiplicatively, not additively. A 50% gain followed by a 50% loss does not net to zero, because the loss is 50% of a larger number than the gain was applied to. The calculator above works through that example with real figures. The gap between the arithmetic average and the actual compound rate grows with how much the yearly returns vary — a steady 7% every year has almost no gap at all, while a portfolio that swings between sharp gains and sharp losses can see a very large one. This is sometimes called volatility drag, and it is a real cost of variability, not an accounting quirk.
What CAGR cannot tell you
- It does not describe any single year. A CAGR of 8% over ten years is consistent with ten calm years near 8%, or with one year up 60% and the rest roughly flat. The two endpoints look identical; the experience of living through them does not.
- It says nothing about what comes next. A historical CAGR describes the past, in the past's own terms. Real returns are not a straight line, in either direction, and this site never turns a computed CAGR into a projected one.
- It ignores anything added or withdrawn along the way. CAGR is a pure start-to-end measure. If money was added or taken out during the period, the true return on the money actually invested is a different — and more involved — calculation. The growth calculator handles monthly contributions properly instead.
How it relates to the other tools
Every other calculator on this site takes a rate as an input and projects forward. This one runs the arithmetic the other way: given what actually happened, what rate explains it? The same annual-to-monthly conversion — the exact one, not the r/12 shortcut — sits behind both directions.
Common questions
Is CAGR the same as annualised return?
Can CAGR be negative?
Why does my brokerage show a different annualised return than this calculator?
Should I use CAGR to compare two investments?
Not advice. This tool applies arithmetic to assumptions you entered. It does not know your circumstances, your tax position or your goals, and it is not a recommendation to buy, sell or hold anything. Past returns do not predict future ones, and no figure here is a forecast.