Use our free cagr calculator to see the average yearly growth of any investment. Tell it your starting and ending values and how many years it took, and it will give you the compound annual growth rate—no jargon, just the hard number.
What the CAGR actually means
CAGR shows the smooth, steady rate that turns your opening balance into your closing one over the exact period you held it. It flattens the peaks and troughs into one clear figure so you see the real trend, not the noise.
You only need three inputs: the amount you started with, the amount you ended with, and the number of full years between them. The calculator works by dividing the ending by the starting, raising that result to the power of 1 divided by the years, subtracting 1, then multiplying by 100 to turn it into a percentage.
Say you invested £1,000 in a fund at the start of 2019 and it reached £1,500 by the end of 2023—that’s four years. The maths is (1500/1000)^(1/4) = 1.1067, minus 1 gives 0.1067, times 100 gives 10.67% a year. That’s the steady pace your money grew, whatever the bumps were along the way.
CAGR only works if you didn’t add or withdraw money during the period. It also ignores risk and volatility, so a fund with wild swings can still show a clean CAGR that hides the rough ride. Plug in a zero for either the start or end value and the formula breaks—you can’t grow from nothing or to nothing and get a sensible result.
How to work it out yourself
- Enter the value at the start of the period.
- Enter the value at the end of the period.
- Enter how many years passed between the two.
- Your compound annual growth rate appears instantly.
CAGR = (Ending ÷ Starting)^(1 ÷ years) − 1CAGR vs. Simple Interest vs. Nominal Return
| Metric | 5-Year CAGR | Nominal Total Return |
|---|---|---|
| Stock Index Fund (S&P 500) | 11.2% | 71% |
| Bonds Portfolio | 4.8% | 26% |
| Savings Account | 1.5% | 7.7% |
| Gold | 6.4% | 35% |
| Cryptocurrency (Bitcoin) | 23.8% | 200% |
Why this number saves you from mistakes
A single bumper year can make a fund look far better than it really is, while a steadier performer gets overlooked. CAGR cuts through that distraction by giving you one honest number. It tells you the real pace of growth, so you can tell the flash-in-the-pan from the fund that quietly delivers year after year.
Three cases worked out step by step
ISA growth over 5 years
You put £8,000 into an ISA in 2019 and it’s worth £11,200 in 2024. Divide 11,200 by 8,000 to get 1.4. Take the fifth root (1/5) of 1.4, which is about 1.070. Subtract 1 to get 0.070, then multiply by 100 for a 7.0% CAGR—£8,000 growing at 7% a year for five years lands you at £11,200.
Pension pot with odd years
You started a pension with £12,500 in March 2017 and it’s £15,800 in October 2022—that’s 5 years and 7 months, or 5.58 years. 15,800 divided by 12,500 is 1.264. Raise 1.264 to the power of 1/5.58 (about 0.179), giving 1.0435. Subtract 1 for 0.0435, times 100 gives 4.35% CAGR, so your pot grew at just over 4% a year.
The slips that trip people up
| Common mistake | What to do instead |
|---|---|
| Using total years instead of fractional when the dates don’t line up | Count the exact years and months, then turn it into a decimal like 5.25 years instead of rounding to 5. The extra months change the root and can swing the CAGR by half a percent. |
| Mixing pounds and pence as if they’re the same | Always use the full decimal amount—£1,250.75 in, not £1,250—and keep the same unit all the way through. A penny off in the starting figure can shift the CAGR by 0.03% over ten years. |
| Adding a withdrawal or deposit midway and still using CAGR | CAGR assumes no cash moves after the start. If you took £500 out in year two, the CAGR no longer tells the real story; use the money-weighted return instead. |
Free calculator to do the hard work
| Tool | What it does |
|---|---|
| CAGR Calculator | Find the compound annual growth rate (CAGR) between a starting and ending value over any number of years. |
Try the CAGR Calculator
Skip the manual maths — enter your numbers and get the answer instantly.
Open the CAGR Calculator →A quick sanity check before you rely on it
Small differences in interest rate, term or timing can add up to large sums over the years. Before committing to any financial decision, run a few different scenarios so you can see the full picture and choose with confidence.
The three things to remember
- CAGR smooths out the noise so you see the real yearly pace of growth.
- Always use the exact number of years, including fractions, to avoid rounding errors.
- Check the dates and the amounts line up with pounds and pence—small slips add up.
Questions fréquentes
What is a good CAGR?
There is no universal benchmark — a good CAGR only means something next to a comparison you can source: the same asset class over the same period, an index, or the rate you actually need to hit your goal. A negative CAGR simply means the value fell over the period.
How is CAGR different from average return?
A simple average just adds yearly returns and divides. CAGR accounts for compounding and the order of returns, so it reflects the real growth you actually experienced.
Does CAGR include dividends or extra deposits?
No. CAGR only uses the start and end value. If you added money along the way, use a SIP or investment calculator for an accurate picture.
