CAGR Calculator
Calculate compound annual growth rate (CAGR) for any investment, business revenue, or savings pot. Or project a future value from a known CAGR. Includes a year-by-year growth table and plain-English interpretation.
Enter beginning value, ending value and number of years to calculate CAGR.
What is CAGR?
CAGR stands for Compound Annual Growth Rate. It is the rate at which an investment, revenue figure, or any measurable value would have grown if it had grown at a steady pace every year, with growth compounding on itself. It is sometimes described as a “smoothed” growth rate because it irons out the volatility of year-to-year fluctuations and gives you a single, comparable number.
CAGR is widely used in finance to compare the performance of investments, funds, or businesses over time. It answers the question: “At what consistent annual rate would I have needed to grow to get from this starting value to this ending value in this number of years?”
CAGR Formula
Where n = number of years. Multiply the result by 100 to express as a percentage.
CAGR vs Simple Average Growth Rate: Why CAGR Is More Accurate
Consider an investment of £10,000. In year one it falls 50% to £5,000. In year two it rises 100% to £10,000. The simple average annual return is (−50% + 100%) ÷ 2 = 25%. But you are no better off than when you started! The CAGR correctly calculates: (£10,000 ÷ £10,000)^(1/2) − 1 = 0%. CAGR always reflects what actually happened to your money.
The gap between simple average and CAGR is known as “volatility drag” — the more volatile an investment, the larger the drag and the greater the difference between the two metrics. This is a key reason why low-volatility investments can outperform high-volatility ones even when headline average returns look similar.
How to Calculate CAGR Step-by-Step
- Identify beginning value: The value at the start of your measurement period.
- Identify ending value: The value at the end of the period.
- Count the years: The number of years between the two measurements.
- Divide: End Value ÷ Beginning Value.
- Apply the exponent: Raise the result to the power of (1 ÷ years).
- Subtract one: The result, expressed as a decimal. Multiply by 100 for the percentage.
Example: An ISA grew from £5,000 to £8,587 over 8 years. CAGR = (8587 ÷ 5000)^(1/8) − 1 = 1.7174^0.125 − 1 = 1.07 − 1 = 0.07 = 7% per year.
CAGR for UK Investments
Stocks and shares ISA: UK investors can shelter up to £20,000 per year in a Stocks & Shares ISA. Over the long term, a globally diversified equity portfolio has achieved approximately 7–10% nominal CAGR. Interest, dividends, and capital gains within an ISA are tax-free, which significantly boosts the effective CAGR compared to a taxable account.
UK stock market (FTSE All-Share): The FTSE All-Share has returned approximately 7% per year in nominal terms over the long run, or around 4–5% in real (inflation-adjusted) terms. The FTSE 100 has delivered similar returns with slightly lower volatility.
Cash savings: UK savings accounts have historically returned 2–5%, though rates were near zero from 2009 to 2022. In real terms, cash savings have often delivered negative CAGR after inflation.
UK Property CAGR
According to the ONS House Price Index (HPI), UK house prices have risen at approximately 6% per year since 2010, with significant regional variation. London has historically seen higher CAGR; parts of the North and Midlands have seen lower but still positive growth. Property CAGR calculations must account for purchase costs (stamp duty, legal fees, survey), ongoing costs (mortgage interest, maintenance, insurance), and eventual sale costs — the net CAGR on capital invested is often lower than the headline price appreciation suggests.
| Asset Class | Approximate CAGR | Notes |
|---|---|---|
| UK Cash Savings | 2–5% | Variable; below inflation in 2010s |
| FTSE All-Share | ~7% nominal | ~5% real (after inflation) |
| Global Equities (FTSE All-World) | 8–10% | Long-run nominal returns |
| UK Property (ONS HPI) | ~6% | Since 2010; before costs |
| UK Bonds (Gilts) | 2–4% | Nominal; 2020s yields risen |
CAGR for Business: Revenue, Sales, and Customer Growth
CAGR is a critical metric for evaluating business performance. Investors and lenders use revenue CAGR over 3–5 years to assess whether a company is growing, stable, or declining. High-growth tech startups are often valued partly on their revenue CAGR: a business growing revenue at 40% CAGR commands a much higher valuation multiple than one growing at 5%. Key metrics commonly expressed as CAGR include:
- Revenue CAGR (most common)
- Customer count CAGR
- EBITDA CAGR (earnings growth)
- Dividend CAGR (for income investors)
- Market size CAGR (used in market research reports)
The Rule of 72
Years to double your money:
At 7% CAGR, your money doubles in approximately 72 ÷ 7 = 10.3 years
The Rule of 72 is one of the most useful mental shortcuts in finance. Divide 72 by your expected annual growth rate to estimate how many years it takes for your investment to double. It works because of the mathematics of compounding and is accurate to within 1–2 percentage points for CAGR rates between 2% and 30%. The exact breakeven is ln(2) / ln(1+r), but 72 is close enough for quick estimates.
Limitations of CAGR
CAGR is a powerful tool but has important limitations that investors must understand:
- Ignores volatility: Two investments with the same CAGR can have wildly different risk profiles. One might grow steadily year after year; another might halve and double repeatedly. CAGR cannot distinguish between these.
- Ignores cash flows: CAGR assumes a lump sum investment at the start and no subsequent contributions or withdrawals. If you add money regularly (e.g. monthly ISA contributions), use IRR or XIRR instead.
- Point-in-time dependency: CAGR is highly sensitive to the start and end dates chosen. A market crash at the end of your period dramatically lowers CAGR; a crash at the start raises it.
- Doesn’t show the path: A 10% CAGR over 10 years could involve a straight line or a rollercoaster. The year-by-year table in our calculator above helps illustrate the path under a constant-rate assumption.
CAGR vs XIRR: When to Use Which
CAGR is appropriate when you have a single lump sum invested at the start and a single final value. XIRR (Extended Internal Rate of Return) should be used when you have multiple cash flows at different dates — for example, monthly pension contributions, ISA top-ups, or property rental income reinvested. In Excel, use =XIRR(values, dates) for irregular cash flows. Both metrics annualise returns on a compound basis, but XIRR accounts for the timing of each cash flow.
Inflation-Adjusted CAGR: Real vs Nominal
Nominal CAGR includes the effect of inflation; real CAGR strips it out. To convert nominal CAGR to real CAGR:
Real CAGR = ((1 + Nominal CAGR) ÷ (1 + Inflation Rate)) − 1
For example, if your portfolio achieved 8% nominal CAGR and inflation averaged 3%, your real CAGR is (1.08 ÷ 1.03) − 1 = 4.85%. When comparing returns across different time periods or countries, always use real CAGR to ensure like-for-like comparison.
How Investors Use CAGR to Compare Funds
When comparing unit trusts, OEICs, ETFs, or pension funds, the FCA requires performance figures to be shown over standardised periods (typically 1, 3, and 5 years). These are always shown as CAGR (annualised returns). Key points for UK investors:
- Always compare funds over the same time period and against the same benchmark index
- Check whether the CAGR includes dividend reinvestment (total return) or excludes it (price return) — total return is almost always higher
- 5+ year CAGR is more meaningful than 1-year for equity funds
- Subtract the Ongoing Charges Figure (OCF) to estimate net-of-fees CAGR
- ISA and SIPP wrappers improve effective CAGR by eliminating tax drag
Worked Examples
Example 1: Stocks & Shares ISA Growth
A 35-year-old invests £15,000 in a global equity ISA. After 20 years, the ISA is worth £57,947.
- CAGR = (57947 ÷ 15000)^(1/20) − 1
- = 3.8631^0.05 − 1
- = 1.07 − 1 = 7% per year
- Total return = 286.3% over 20 years
Example 2: UK Property Appreciation
A property bought for £220,000 in 2015 is worth £330,000 in 2025 (10 years).
- CAGR = (330000 ÷ 220000)^(1/10) − 1
- = 1.5^0.1 − 1
- = 1.0414 − 1 = 4.14% per year
- Total gain: £110,000 (50% total return)
Example 3: Business Revenue Growth
A SaaS startup had revenue of £180,000 in 2020 and £680,000 in 2025 (5 years).
- CAGR = (680000 ÷ 180000)^(1/5) − 1
- = 3.778^0.2 − 1
- = 1.304 − 1 = 30.4% per year
- This is strong growth; a typical VC-backed SaaS company targets 30–50% revenue CAGR.
CAGR in Excel: Formula Reference
| Task | Excel Formula | Notes |
|---|---|---|
| Calculate CAGR | =(B2/A2)^(1/C2)-1 | A2=Start, B2=End, C2=Years. Format as % |
| Project future value | =A2*(1+B2)^C2 | A2=Start, B2=CAGR (decimal), C2=Years |
| CAGR with RATE function | =RATE(C2,0,-A2,B2) | Same result; RATE is built-in |
| XIRR for cash flows | =XIRR(values,dates) | Use for multiple cash flows |
| Years to double | =LN(2)/LN(1+A2) | A2=CAGR as decimal; exact Rule of 72 |
Frequently Asked Questions
What is CAGR and how do you calculate it?
CAGR (Compound Annual Growth Rate) is the rate at which an investment would have grown each year if it grew at a steady compounded rate. Formula: CAGR = (End Value ÷ Start Value)^(1/n) − 1, where n is the number of years. For example, if you invested £10,000 and it grew to £14,693 over 4 years: CAGR = (14693 ÷ 10000)^(1/4) − 1 = 1.4693^0.25 − 1 = 1.10 − 1 = 10%. Use the calculator above for instant results.
What is a good CAGR for an investment?
Context is everything. For a low-risk UK cash ISA, 3–4% is reasonable. For a diversified equity portfolio, the FTSE All-Share has historically returned around 7% nominal CAGR; global equities around 8–10%. For a business, revenue CAGR of 15–20% is solid for an established company; a high-growth startup might target 30–50%. The key benchmark is whether the CAGR exceeds inflation (currently targeted at 2% by the Bank of England) to produce a positive real return.
How does CAGR differ from average annual return?
Simple average annual return adds up each year’s percentage change and divides by years. CAGR uses compounding to calculate the equivalent steady growth rate. CAGR is always lower than or equal to the simple average when returns are volatile. Example: an investment falls 50% in year one, then rises 100% in year two. Simple average = 25%; CAGR = 0% (you ended where you started). CAGR is the more accurate measure of real investment performance because it reflects the actual compounded outcome.
What is the CAGR of the UK stock market?
The FTSE All-Share has historically delivered approximately 7% nominal CAGR over long periods (10+ years), including dividend reinvestment. In real terms (adjusted for UK inflation), this is closer to 4–5%. The FTSE 100 has performed similarly, while global equity indices (including US exposure) have tended to outperform due to the large weighting of high-growth technology companies. Short-term CAGR figures are unreliable; meaningful performance comparisons require at least 5 years of data.
How do I calculate CAGR in Excel?
In Excel, if your starting value is in A2, ending value in B2, and number of years in C2, type =(B2/A2)^(1/C2)-1 in an empty cell, then format the result as a percentage. You can also use the built-in RATE function: =RATE(C2,0,-A2,B2), which gives the same answer. For multiple cash flows at irregular intervals (e.g. ISA top-ups), use =XIRR(values_array, dates_array) instead, which accounts for the exact timing of each cash flow.
What is the rule of 72 and how does it relate to CAGR?
The Rule of 72 is a quick mental maths trick: divide 72 by the CAGR% to estimate how many years it takes to double your investment. At 6% CAGR: 72 ÷ 6 = 12 years. At 9%: 72 ÷ 9 = 8 years. At 12%: 72 ÷ 12 = 6 years. The rule works because of the logarithmic nature of compounding and is accurate within 1–2 years for CAGR rates between 2% and 30%. The mathematically exact answer is ln(2) ÷ ln(1 + CAGR), but the Rule of 72 is close enough for quick planning.