Calculate the compound annual growth rate between a starting value and an ending value over a multi-year period.
CAGR = (Ending ÷ Beginning)^(1 ÷ Years) − 1Calculate CAGR from a beginning value, ending value and number of years, with the formula, limitations and related return metrics explained clearly.
CAGR is the constant annualized rate that would connect a beginning value to an ending value if growth had compounded steadily over the full period. It is a smoothing measure, not a record of what happened in each individual year.
Toolmera uses CAGR = ((Ending Value ÷ Beginning Value)^(1 ÷ Years) − 1) × 100.
Total return measures the overall percentage change from beginning to end without considering how long the period lasted. CAGR converts that start-to-finish change into one annualized compounded rate.
A simple average of yearly returns can be misleading because gains and losses compound multiplicatively. CAGR is geometric, but it still does not reveal the actual path of yearly returns.
CAGR hides volatility and ignores intermediate deposits or withdrawals. Two investments can have the same CAGR even if one followed a smooth path and the other moved sharply up and down.
When cash flows happen on different dates, a cash-flow-aware measure such as XIRR is usually more appropriate than simple CAGR.
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CAGR means compound annual growth rate. It is the constant annualized compounded rate that links a beginning value to an ending value over a specified period.
No. Total return measures overall growth across the full period; CAGR annualizes that growth into one compounded yearly rate.
No. CAGR smooths the full period into one rate and does not describe the actual year-by-year path.
Not correctly by itself. Intermediate cash flows generally require a cash-flow-aware measure such as XIRR.