What is CAGR?
Compound Annual Growth Rate — the single smoothed annual rate that would take an investment from its start value to its end value over a period.
Educational — not investment advice
CAGR answers "what steady yearly return would produce this result?" It takes the total growth over N years and expresses it as one compounded annual figure, so you can compare investments of different lengths on an apples-to-apples basis.
The formula is (ending value ÷ beginning value)^(1 ÷ years) − 1. A holding that doubled over 6 years has a CAGR of about 12.2%.
The trap most people miss
CAGR is a smoothed average — it hides the ride entirely. Two investments with the same CAGR can have wildly different volatility and drawdowns along the way. It also says nothing about cash added or withdrawn mid-period.
Frequently asked about CAGR
What is a good CAGR?
It depends on the asset and period. Broad equity indices have historically compounded around 7–10% annually before inflation — but past averages are not a promise.
Is CAGR the same as average return?
No. A simple average of yearly returns overstates results because it ignores compounding and volatility drag. CAGR is the true compounded rate.
Related terms
In Tradune: compute compounded growth with the calculator.
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This definition is for educational purposes only and is not investment, tax, or financial advice. Concepts are explained in general terms; how they apply to your situation can differ. Always do your own research.