Is CAGR the same as annualized ROI?

Yes, they're calculated the same way — CAGR is simply the common name used for growth rates over multi-year periods, especially in investment and business contexts.

Why use CAGR instead of total percentage growth?

CAGR normalizes growth to a per-year basis, making it possible to fairly compare investments or businesses that grew over different lengths of time.

CAGR Calculator

Calculate CAGR (Compound Annual Growth Rate) — the smoothed, constant annual growth rate that would take a beginning value to an ending value over a given number of years.

Beginning value

Ending value

Number of years

CAGR

7.18%

Compound Annual Growth Rate

How It Works

The CAGR formula

CAGR = (ending value ÷ beginning value)^(1 ÷ years) − 1 — this finds the single steady growth rate that connects the two values, smoothing out any actual year-to-year fluctuation.

Example Calculation

An investment that grows from $1,000 to $2,000 over 10 years has a CAGR of about 7.18% — even though the actual year-to-year returns almost certainly varied.

Common Mistakes

Confusing CAGR with the average of yearly returns — CAGR is a compound (geometric) rate, not a simple average, and the two can differ meaningfully for volatile investments.
Using CAGR to predict future performance — it only describes what happened historically between two points, not a guarantee of future growth.

Frequently Asked Questions

Is CAGR the same as annualized ROI?: Yes, they're calculated the same way — CAGR is simply the common name used for growth rates over multi-year periods, especially in investment and business contexts.
Why use CAGR instead of total percentage growth?: CAGR normalizes growth to a per-year basis, making it possible to fairly compare investments or businesses that grew over different lengths of time.