What is CAGR?
CAGR (Compound Annual Growth Rate) is the rate at which an investment grows annually over a specific period, assuming the profits were reinvested each year.
What does the CAGR Calculator do?
The calculator helps you compute the average annual growth rate of your investment over a period of time, smoothing out fluctuations in between.
How is CAGR Calculator?
The formula used is:
- CAGR = (Final Value / Initial Value) ^ (1 / Number of Years) - 1
Formula components:
- Initial Value: The amount you originally invested.
- Final Value: The amount your investment is worth after a certain period.
- Number of Years: The total time period (in years) the investment was held.
What inputs are required?
You typically need:
- Initial Investment Value (Start Value)
- Final Investment Value (End Value)
- Time period (in years or months)
Why use CAGR instead of absolute return?
CAGR gives a smoothed annual growth rate, which is more useful for comparing different investments over time, especially when returns vary year to year.
Can CAGR be negative?
Yes. If the final value is less than the initial value, the CAGR will be negative, indicating a loss over the period.
Does CAGR account for intermediate gains or losses?
No. CAGR only considers the start and end values, not the volatility or changes in between.
Is CAGR the same as annual return?
Not exactly. Annual return may vary each year. CAGR gives the average annual return assuming compounding.
Can I use CAGR for SIP or periodic investments?
No. CAGR is only valid for lump-sum investments. For systematic investments (like SIPs), use XIRR or IRR instead.
Who should use this calculator?
It’s useful for:
- Investors tracking portfolio performance
- Financial analysts
- Business owners assessing growth
- Anyone comparing growth rates of different assets or companies