How to use it
- Use the formula below with your own figures.
The formula
CAGR = (end/start)^(1/years) − 1.
Worked example
Growing $1,000 to $2,000 in 7 years is about 10.4% CAGR.
Frequently asked questions
Why use CAGR?
It smooths returns into one annual rate.
Does it show volatility?
No — it ignores the path taken.
Tips
- Time in the market beats timing the market.
- Reinvest returns to let compounding work.
- Keep fees low — they compound against you.
Key terms
- Compounding
- Earning returns on past returns.
- CAGR
- The smoothed annual growth rate.
- Yield
- Income as a percent of price.