What was your actual annual return? Enter your start and end values.
CAGR, or Compound Annual Growth Rate, is the constant annual rate that would take an investment from its starting value to its ending value over a set period if it grew at the same pace every year. A stock that actually moved up 40% one year and down 10% the next still has a single CAGR number covering both years combined.
A simple average treats a 50% gain and a 50% loss as canceling out to a 0% average, but $100 that goes up 50% then down 50% ends at $75, a real loss. CAGR reports the actual compounded path instead of averaging misleading percentages.
Yes. CAGR describes the constant rate that connects a starting value to an ending value, so if the ending value is lower the rate is negative.
The 50% up then 50% down case is the clearest example. $100 becomes $150, then $75. The simple average of the two years is 0%, but the CAGR is -13.40% a year, because that is the steady rate that actually turns $100 into $75 over two years.
CAGR equals the ending value divided by the starting value, raised to the power of 1 divided by the number of years, minus 1. Multiply the result by 100 to read it as a percentage.
CAGR (Compound Annual Growth Rate) measures the constant annual rate of return that would take an investment from its starting value to its ending value over a given period, assuming the growth compounds every year. It answers "what single steady annual rate would have produced this result?" even if the real path was volatile.
This is different from a simple average of yearly returns, which can be misleading: an investment that goes up 50% one year and down 50% the next has an average return of 0%, but it actually lost money overall (100 → 150 → 75), because gains and losses aren't symmetric in percentage terms. CAGR captures the real compounded outcome instead of averaging misleading percentages.
The formula is: CAGR = (Ending value / Starting value)^(1/years) − 1. Because it smooths volatility into a single number, CAGR is the standard way to compare investments with different time horizons or wildly different year-to-year performance on equal footing.