What Is CAGR? The Smooth Average Behind Investment Growth
CAGR — Compound Annual Growth Rate — turns a bumpy investment ride into one steady yearly number. Here is what it means and where it breaks down.
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CAGR (Compound Annual Growth Rate) smooths multi-period performance into a single number, making it easier to compare different investments or benchmark returns over the same window.
Core Formula
CAGR = (Final / Initial)^(1/years) − 1
What is a good CAGR?
The S&P 500 averages roughly 10% annually before inflation. A 7–9% real CAGR is excellent for a diversified long-term portfolio.
Why doesn't CAGR reflect volatility?
CAGR ignores the path of returns. Two investments with the same CAGR can have very different risk profiles.
* All calculations above are theoretical estimates. Actual returns vary based on market performance, fees, taxes, inflation, and economic factors. This tool is for educational purposes only — not financial advice.
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Ads are from third parties. CompoundFig does not endorse advertised products and is not responsible for their claims. Our calculators remain independent educational estimates.