๐ CAGR Calculator
Calculate Compound Annual Growth Rate of Your Investment
What Is a CAGR Calculator?
A CAGR Calculator helps you calculate the Compound Annual Growth Rate of an investment over a specific period. It uses the starting value, ending value and investment duration to show the annualised growth rate.
CAGR is useful when you want to understand how an investment grew between two points in time. Unlike a simple total-return percentage, CAGR incorporates the length of the investment period and expresses the growth as an annualised rate.
How Does the CAGR Calculator Work?
To calculate CAGR, enter the initial value of your investment, the final value and the number of years for which the investment was held. The calculator then applies the standard CAGR formula and displays the annualised growth rate.
For example, if an investment starts at ₹1,00,000 and grows to ₹1,80,000 over five years, the calculator determines the annualised rate at which the investment would have needed to compound to reach that ending value.
CAGR Formula
The standard Compound Annual Growth Rate formula is:
CAGR = [(Ending Value ÷ Beginning Value) ^ (1 ÷ Number of Years)] − 1
The resulting value is multiplied by 100 to express CAGR as a percentage.
CAGR vs Absolute Return
Absolute return tells you the total percentage gain or loss between the starting and ending values without annualising the result. CAGR additionally considers the investment period and expresses the growth rate on an annualised basis.
For example, an investment can have the same absolute gain but produce a different CAGR if it takes a different amount of time to reach the final value.
Where Can CAGR Be Used?
CAGR can be used to analyse the historical growth of a one-time investment when there are clear beginning and ending values and a defined investment period.
- Mutual fund investment analysis
- Stock investment performance analysis
- Portfolio growth comparison
- Business revenue growth analysis
- Asset value growth analysis
- Long-term investment performance review
Why Is CAGR Useful?
Investment values can move up and down from year to year. CAGR converts the change between two points into a single annualised growth rate. This makes it easier to describe long-term growth using one standard figure.
However, CAGR is a mathematical measure based on the beginning value, ending value and time period. It does not show the actual year-by-year path of an investment or the volatility experienced during the period.
CAGR and SIP Are Not the Same
CAGR is generally designed for a one-time investment with a beginning value and an ending value. SIP investments involve multiple cash flows occurring at different times. For such investments, XIRR can account for the timing of individual cash flows and is commonly used for annualised return calculations.
Frequently Asked Questions
What does CAGR stand for?
CAGR stands for Compound Annual Growth Rate. It represents the annualised growth rate between a beginning value and an ending value over a specified period.
Can I calculate CAGR for stocks?
Yes. If you know the starting value, ending value and holding period, CAGR can be calculated to express the annualised growth between those two values.
Can CAGR be used for mutual funds?
Yes. CAGR can be used to analyse the annualised growth of a lump-sum investment over a defined period. For multiple investments made at different times, XIRR may be more appropriate.
Is CAGR the actual return earned every year?
No. CAGR is an annualised mathematical measure. It represents the constant annual growth rate that would connect the beginning value to the ending value over the stated period. Actual yearly returns can vary significantly.
Does a higher CAGR guarantee better future performance?
No. Historical CAGR does not guarantee future investment returns. Investment performance can change over time and involves market risk.