Formula
CAGR = (ending value divided by beginning value) raised to 1 divided by years, minus 1. It smooths growth as if it happened at a constant annual rate.
CAGR Calculator
Calculate the annualized growth rate between a beginning value and ending value.
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Formula
CAGR = (ending value / beginning value) raised to 1 divided by years, minus 1. It smooths the path into one annual rate.
Example
A value that grows from 10,000 to 15,000 over 5 years has a different annual story from the same growth over 2 years. CAGR makes the timing comparable.
Common mistake
CAGR hides volatility. A smooth annual rate does not mean the value rose smoothly every year.