CAGR Calculator
Calculate the Compound Annual Growth Rate of your investments to understand their true performance over time
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Input your initial investment amount, final value, and the time period in years.
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CAGR Calculator
Calculate the Compound Annual Growth Rate of your investments over time
CAGR Calculator
Calculate the Compound Annual Growth Rate (CAGR) of your investments over time.
Your CAGR Results
See how your investment grows over time
Calculation History
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About CAGR
Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period longer than one year. It represents one of the most accurate ways to calculate and determine returns for individual assets, investment portfolios, and anything that can rise or fall in value over time.
Key Features of CAGR
- Smooths Returns: CAGR smooths out investment returns by assuming a constant rate of growth over the investment period.
- Accounts for Compounding: Unlike simple average, CAGR takes into account the compounding effect of returns over time.
- Comparative Tool: CAGR is useful for comparing investments of different types over various time periods.
Formula
CAGR = (Final Value / Initial Value)1/n - 1
Where n is the number of years
Limitations
- It ignores volatility by smoothing returns over time.
- It assumes a steady growth rate, which rarely happens in real-world investments.
- It doesn't account for additional investments or withdrawals during the investment period.
Understanding CAGR
Learn how Compound Annual Growth Rate works and why it matters
The Compound Annual Growth Rate (CAGR) is a financial metric that represents the annual growth rate of an investment over a specific period. Unlike a simple average, CAGR accounts for the compounding effect, providing a more accurate picture of investment performance.
CAGR Formula
CAGR = (Final Value / Initial Value)1/n - 1
Where:
- Final Value: The ending value of your investment
- Initial Value: The starting value of your investment
- n: The number of years the investment was held
Example Calculation
Let's say you invested ₹1,00,000 and after 5 years, your investment is worth ₹1,61,051.
Given values:
- Initial Value = ₹1,00,000
- Final Value = ₹1,61,051
- Time Period = 5 years
Calculation:
CAGR = (1,61,051 / 1,00,000)1/5 - 1
CAGR = (1.61051)0.2 - 1
CAGR = 1.1 - 1
CAGR = 0.1 or 10%
This means your investment grew at a consistent rate of 10% annually over the 5-year period, accounting for the compounding effect.
Benefits of Using CAGR
Why CAGR is important for investors
Smooths Out Volatility
CAGR smooths out investment returns by assuming a constant growth rate, making it easier to understand overall performance.
Comparison Tool
Allows for fair comparison of investments with different timeframes or starting amounts.
Accounts for Compounding
Unlike average returns, CAGR factors in compounding effects for more accurate performance measurement.
Industry Standard
CAGR is widely used in the investment industry, making it a trusted and recognized metric.
Portfolio Evaluation
Helps evaluate the performance of different assets within a portfolio to make informed decisions.
Goal Planning
Useful for financial planning and setting realistic growth targets for long-term investment goals.
Frequently Asked Questions
Common questions about CAGR and investment growth
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