CAGR Calculator

Calculate the Compound Annual Growth Rate of your investments.

CAGR Calculator

Growth
Years

Breakdown

About CAGR

CAGR (Compound Annual Growth Rate) measures 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 anything that can rise or fall in value over time.

Key Uses:

  • Comparing historical returns of stocks/funds
  • Analyzing business revenue growth
  • Projecting future value based on past performance
  • Evaluating portfolio performance against benchmarks

How CAGR Works

CAGR Formula:

CAGR = (Ending Value / Beginning Value)^(1/n) - 1

Ending Value = Final amount

Beginning Value = Initial investment

n = Number of years

Unlike simple annual return, CAGR assumes that profits are reinvested at the end of each year, providing a smoothed annual rate of return.

Key Insights

📈 Volatility Masking

CAGR smooths out volatility. An investment might drop 50% one year and rise 100% the next, but CAGR gives a single steady rate, so always check annual volatility too.

🕒 Time Horizon

CAGR is most effective for periods of 3-5 years or more. For shorter periods, absolute return or simple annualized return might be more appropriate.

💰 Inflation Adjustment

To find your "Real CAGR", subtract the inflation rate from your CAGR. If CAGR is 12% and inflation is 6%, your real purchasing power grew by ~6%.

Did You Know?

📉 The 72 Rule

Divide 72 by your CAGR to find how many years it takes to double your money. At 12% CAGR, money doubles in 6 years (72/12).

🔄 SIP vs Lumpsum

CAGR is for lumpsum investments. For SIPs (regular investments), use XIRR (Extended Internal Rate of Return) for accurate performance measurement.

📊 Benchmark Comparison

A good CAGR is relative. 15% is great for large-cap equity, but might be average for a small-cap fund or risky startup investment.

Frequently Asked Questions About CAGR

CAGR stands for Compound Annual Growth Rate. It's the average annual rate at which an investment grows over a specified period longer than one year, assuming the profits are reinvested at the end of each year.
The formula for CAGR is: ((Ending Value / Beginning Value)^(1 / Number of Years)) - 1. This calculator automates that for you.
CAGR provides a smoothed annual return, making it easier to compare the performance of different investments over varying time horizons. It accounts for compounding, giving a more realistic picture of growth than simple average returns.
CAGR assumes a steady growth rate, which is rarely the case in real-world investments. It doesn't reflect volatility or the actual year-to-year performance fluctuations. It also doesn't account for additional contributions or withdrawals during the investment period.
Yes, if the final value of an investment is less than its initial value after a period, the CAGR will be negative, indicating an average annual loss.