CAGR Calculator With Extra Cash Flows

CAGR Calculator


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CAGR Calculator

Calculator Description

The CAGR Calculator works out the Compound Annual Growth Rate of an investment — the single, steady annual growth rate that would take it from its starting value to its ending value over a given number of years, as if it had grown at exactly that rate every year. It also supports regular contributions or withdrawals made during the holding period, so the result reflects the underlying investment's growth rather than being skewed by money you added or took out along the way.

The Purpose

Raw dollar gains and simple percentage returns can be misleading when comparing investments held over different time periods. A stock that doubled in 2 years and one that doubled in 8 years both show "+100%," but they grew at very different rates. CAGR solves this by smoothing returns into a single annualized figure, making it possible to:

  • Compare the performance of different investments (stocks, funds, real estate, a business) on a like-for-like, per-year basis
  • Judge whether an investment's growth has kept pace with a benchmark, inflation, or a personal target rate
  • Project a plausible future value by assuming past growth continues at the same annualized pace
  • See growth performance separately from the effect of money added to or withdrawn from an account

Explaining the Input Sections

Beginning Value ($) — Required. The value of the investment at the start of the period being measured, e.g. your initial investment or the account balance on day one.

Ending Value ($) — Required. The value of the investment at the end of the period, in the same currency as the Beginning Value.

Number of Years — Required. The length of time between the Beginning Value and the Ending Value. Fractional years (e.g. 2.5) are accepted for periods that don't fall on a whole-year boundary.

Additional Contributions ($ per Year) — Optional, defaults to 0. Money added to the investment each year during the period, such as regular deposits or reinvested savings. Leave this at 0 if none were made.

Additional Withdrawals ($ per Year) — Optional, defaults to 0. Money taken out of the investment each year during the period, such as regular withdrawals. Leave this at 0 if none occurred.

Formula

Standard CAGR (no contributions or withdrawals):

CAGR = (Ending Value / Beginning Value)^(1 / Years) − 1

Adjusted CAGR (with contributions and/or withdrawals):

Because contributions and withdrawals are cash flowing in or out — not investment growth — they're removed from the Ending Value before annualizing:

Total Contributions = Contribution per Year × Years

Total Withdrawals   = Withdrawal per Year × Years

 

Adjusted Ending Value = Ending Value − Total Contributions + Total Withdrawals

 

CAGR = (Adjusted Ending Value / Beginning Value)^(1 / Years) − 1

This adjustment is a simplified approximation. It treats all contributions and withdrawals as if they had no time to compound themselves, which keeps the formula straightforward but is less precise than a full money-weighted return method like XIRR (which accounts for exactly when each cash flow occurred).

Worked Example

Suppose you invest $10,000, and 5 years later the account is worth $20,000. You also added $500 per year to the account and made no withdrawals.

  1. Total Contributions = $500 × 5 = $2,500
  2. Total Withdrawals = $0 × 5 = $0
  3. Adjusted Ending Value = $20,000 − $2,500 + $0 = $17,500
  4. CAGR = (17,500 / 10,000)^(1/5) − 1 = (1.75)^(0.2) − 1 ≈ 0.1184, or 11.84%

So, once the effect of the extra $2,500 you contributed is stripped out, the underlying investment grew at roughly 11.84% per year. Note this is lower than the naive "total growth" figure (+100% over 5 years, or a simple ~14.87% CAGR calculated without adjusting for contributions), because part of the account's rise came from money you added rather than investment performance.

5 FAQ

1. What's the difference between CAGR and simple/average annual return? A simple average return adds up each year's percentage gain and divides by the number of years, which can overstate performance because it ignores compounding. CAGR accounts for compounding, so it reflects the actual smoothed annual rate needed to get from the start value to the end value.

2. Why isn't the contribution/withdrawal adjustment perfectly precise? This calculator assumes contributions and withdrawals happen evenly across the period and simply nets them against the Ending Value. It doesn't account for exactly when each cash flow occurred during the year, so it's a useful approximation rather than an exact money-weighted return. For precise cash-flow timing, a full XIRR/IRR calculation is more appropriate.

3. Can CAGR be negative? Yes. If the Adjusted Ending Value is lower than the Beginning Value, the calculator will return a negative percentage, indicating the investment lost value on an annualized basis over the period.

4. Does CAGR predict future performance? No. CAGR is a historical, backward-looking measure. It describes how an investment performed over a specific past period and does not guarantee or predict how it will perform going forward.

5. What should I use for "Ending Value" if I made withdrawals along the way? Use the actual final balance of the account, exactly as it stood at the end of the period — not adjusted for the withdrawals yourself. Enter the withdrawal amounts separately in the "Additional Withdrawals" field, and the calculator will account for them automatically.

Disclaimer: This calculator provides estimates for educational and informational purposes only. Actual results may vary based on your individual circumstances, assumptions, fees, taxes, market conditions, and other factors. It should not be considered financial, investment, or tax advice.