Calculate the compound annual growth rate of an investment or business metric over time.
This calculator shows historical growth rates. Past performance is not a reliable indicator of future results. This is not financial advice.
CAGR, or Compound Annual Growth Rate, is one of the most widely used metrics in finance and business analysis. It tells you the smoothed annual rate of return that an investment, revenue stream, or any other metric would have needed to grow from its beginning value to its ending value over a specified period, assuming the growth had been steady and compounded each year. The beauty of CAGR is its simplicity. Real-world investments fluctuate wildly from year to year. A portfolio might gain 25% one year and lose 10% the next. CAGR cuts through this noise to give you a single, meaningful number that represents the overall annualised performance. This makes it invaluable for comparing investments, benchmarking business growth, or setting realistic expectations for future planning. For UK investors, CAGR is particularly useful when evaluating the long-term performance of ISAs, pension funds, property investments, or individual stocks. It is also commonly used in business contexts to measure revenue growth, customer base expansion, or market share changes over multi-year periods. Financial advisers and analysts reference CAGR frequently because it accounts for the compounding effect that simple average returns ignore. One important caveat: CAGR assumes smooth growth, which never happens in practice. It does not capture volatility, risk, or the sequence of returns. Two investments can have identical CAGRs but very different risk profiles. Always consider CAGR alongside other metrics like maximum drawdown, standard deviation, and the Sharpe ratio for a complete picture of investment performance.
To use the CAGR calculator: 1. Enter the Beginning Value. This is the starting point of your measurement. For an investment, it is the initial amount invested or the portfolio value at the start of the period. 2. Enter the Ending Value. This is the value at the end of your measurement period. For a portfolio, it is the current or final valuation. 3. Enter the Number of Years. This is the time span between your beginning and ending values. It must be at least 1 year. 4. Review the results. The CAGR shows your annualised compound growth rate as a percentage. The Total Return shows the overall percentage gain or loss across the entire period. The Formula field displays the exact calculation performed. Example: If you invested GBP 10,000 seven years ago and your portfolio is now worth GBP 20,000, the CAGR is approximately 10.41%, meaning your money grew at an annualised rate equivalent to 10.41% per year, compounded.
The CAGR formula is: CAGR = (Ending Value / Beginning Value)^(1/Years) - 1 This is derived from the compound interest formula solved for the rate. If FV = PV x (1 + r)^t, then r = (FV/PV)^(1/t) - 1. Example 1: GBP 10,000 growing to GBP 20,000 over 7 years CAGR = (20000 / 10000)^(1/7) - 1 = 2^0.1429 - 1 = 0.1041 = 10.41% Example 2: GBP 5,000 growing to GBP 15,000 over 10 years CAGR = (15000 / 5000)^(1/10) - 1 = 3^0.1 - 1 = 0.1161 = 11.61% Total Return is calculated separately as: Total Return = ((Ending Value - Beginning Value) / Beginning Value) x 100 In Example 1, the total return is 100% (the investment doubled), but the annualised rate is only 10.41% because of compounding. This distinction is crucial: a 100% total return over 7 years is very different from a 100% total return over 1 year. Note that CAGR only works with positive beginning values. If the beginning value is zero or negative, the formula is undefined. Similarly, CAGR requires at least one full year to be meaningful.
When comparing UK investment options, CAGR provides an apples-to-apples comparison. The FTSE All-Share index has delivered a CAGR of approximately 7-8% over the past 30 years (with dividends reinvested). UK residential property has averaged roughly 5-7% CAGR. Cash savings accounts have varied from 0.5% to 5% depending on the interest rate environment. Remember that these are nominal returns; adjusting for inflation (typically 2-3% in the UK) gives you the real CAGR, which better reflects purchasing power growth. For projecting future investment growth based on an assumed CAGR, try our Future Value Calculator. For specific ISA or pension projections, use the dedicated ISA Calculator or Pension Calculator.