CAGR calculator
Enter a starting value, an ending value and the number of years to get the compound annual growth rate instantly — the single smoothed rate your money actually grew at each year, with a plain-English read on whether it's modest, solid or suspiciously good.
What is CAGR?
CAGR — the compound annual growth rate — is the constant yearly rate that would carry a starting value to its ending value, as if it compounded smoothly the whole way. It is a geometric rate, not an arithmetic average, so it accounts for the fact that gains and losses compound on each other:
CAGR = (Ending ÷ Starting)^(1 ÷ years) − 1
That geometric nature is exactly why CAGR is more honest than a simple average of yearly returns. A year of +50% followed by −50% averages to zero, but leaves you down 25% — CAGR reports the real, lived result while the average flatters it.
What is a good CAGR?
- < 0% — a loss; the ending value is below where you started.
- 0–7% — modest; below the long-run equity market average.
- 7–15% — solid and market-like; roughly what broad indices have delivered.
- 15–25% — strong; hard to sustain for long without real skill or leverage.
- > 25% — exceptional, and a red flag on a backtest: sanity-check it for overfitting, unrealistic costs or look-ahead bias.
CAGR hides the ride
A headline growth rate says nothing about how you got there. Two strategies can post the same CAGR while one glides and the other plunges 45% mid-way and grinds back for two years. The number that tells you which is which is maximum drawdown — measure the deepest peak-to-trough fall here before you trust any growth figure.
Read growth alongside risk
QUANTHEON Lab reports CAGR next to maximum drawdown and the Sharpe ratio on every backtest, so a smooth-looking growth rate is never read in isolation. And because a backtested CAGR is easy to inflate by tuning parameters, the Lab re-tests your edge out-of-sample and applies a Deflated-Sharpe haircut — separating a real growth rate from a curve-fit one.
FAQ
What is CAGR?
CAGR is the compound annual growth rate: the single smoothed rate at which a value would have grown each year to go from its starting figure to its ending figure. It equals (ending ÷ starting) raised to (1 ÷ years), minus 1.
Is CAGR the same as average annual return?
No. CAGR is geometric and accounts for compounding, while a simple average of yearly returns overstates growth because it ignores how losses compound. CAGR reports the result you actually lived.
What is a good CAGR?
Roughly: below 0% is a loss, 0–7% is modest, 7–15% is solid and market-like, 15–25% is strong, and above 25% is exceptional — and on a backtest, worth double-checking for overfitting.
Related: Max drawdown calculator · Sharpe ratio calculator · How to backtest a strategy