CAGR Calculator

The simplest compound annual growth rate calculator.

Calculators

CAGR Calculator Growth

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Growth Summary

Absolute Return
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CAGR
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CAGR (Compound Annual Growth Rate) Calculator

The Compound Annual Growth Rate (CAGR) is the rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each year of the investment's lifespan.

Why is CAGR important?

Investments like stocks and mutual funds do not grow at a steady rate. A stock might go up 20% one year, down 10% the next, and up 15% the year after. Absolute return just shows the total growth, but CAGR smooths out this volatility and gives you a single, annualized equivalent growth rate. This makes it the best metric to compare different investments.

How is CAGR calculated?

CAGR = [(Final Value / Initial Value)^(1 / n)] - 1

Where:
n = Number of years
Example:

You invested ₹10,000 in a mutual fund. After 5 years, it is worth ₹25,000.

Absolute Return = (25000 - 10000) / 10000 = 150%
CAGR = [(25000 / 10000)^(1 / 5)] - 1 = 20.11%

This means your money grew at an equivalent steady rate of 20.11% every single year.

Absolute Return vs CAGR

  • Absolute Return: Measures the total gain or loss, regardless of how long it took. (A 50% return looks great, but not if it took 10 years).
  • CAGR: Factors in the time value of money. It is the standard metric used to evaluate mutual fund performance.

Frequently Asked Questions

What is Compound Annual Growth Rate (CAGR)?
CAGR is a mathematical formula that provides a smoothed annualized return rate of an investment, assuming it grew at a steady pace every year.
Why is CAGR better than absolute return?
Absolute return only shows total profit, ignoring the time factor. A 50% absolute return over 1 year is great, but over 10 years, it is poor. CAGR standardizes the return on a yearly basis.
Can CAGR be negative?
Yes, if the final value of your investment is lower than the initial investment, the CAGR will accurately reflect the annualized rate of loss.
Can I use this Cagr Calculator for free?
Yes, this Cagr Calculator is completely free to use. You can use it as many times as you want without any hidden charges or registration.
How much time does it take to use the Cagr Calculator?
It takes less than a minute! Our calculator works instantly. Just enter your values in the input fields, and the results, along with visual charts, are generated in real-time.