CAGR Calculator
Calculate Compound Annual Growth Rate quickly and easily
Your CAGR
Your investment grew from $0 to $0 over 0 years.
| Year | Starting Value | Ending Value | Annual Growth | Growth % |
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About CAGR
Compound Annual Growth Rate (CAGR) represents the annualized growth rate of an investment over a specific period.
CAGR Formula
Why Use CAGR?
- Measures annualized investment growth
- Makes different investments easier to compare
- Removes the effect of short-term fluctuations
Created by : What Is CAGR?
CAGR (Compound Annual Growth Rate) is a measure of the average annual growth rate of an investment over a specific period. It converts the growth between an initial value and a final value into an annualized rate, assuming the growth was compounded at a constant rate.
CAGR is useful when you want to compare the long-term growth of investments, businesses, portfolios, or other assets over different periods.
CAGR Formula
The standard formula for calculating CAGR is:
Where:
How to Calculate CAGR
To calculate CAGR manually, you only need three values: the initial investment, final investment value, and the investment period.
- Enter the initial value. This is the amount invested at the beginning.
- Enter the final value. This is the value of the investment at the end.
- Enter the investment period. Enter the number of years between the two values.
- Apply the CAGR formula. Divide the final value by the initial value, raise the result to the power of 1 divided by the number of years, and subtract 1.
You can also enter these values in the calculator above to calculate CAGR instantly.
CAGR Example
Suppose you invested ₹1,00,000 and the investment grew to ₹2,50,000 after 6 years.
This means the investment's start-to-end growth is equivalent to a compounded annual growth rate of approximately 16.50%.
What Does CAGR Tell You?
CAGR provides a simple way to understand long-term growth without focusing on the fluctuations that occurred during individual years.
Converts total growth into an annual compounded rate.
Helps compare investments with different starting values or time periods.
Useful for understanding the overall growth of an investment over several years.
CAGR vs Other Return Metrics
CAGR is not the only way to measure investment performance. The right metric depends on the type of investment and cash-flow pattern.
| Metric | What It Measures | Best Used For |
|---|---|---|
| CAGR | Annualized compounded growth | Start-to-end growth |
| Absolute Return | Total percentage gain or loss | Simple investment comparison |
| IRR | Return considering cash flows | Projects and investments with multiple cash flows |
| XIRR | Annualized return using actual dates | SIPs and irregular cash flows |
When Should You Use CAGR?
CAGR is particularly useful when you want to evaluate long-term growth between two points in time.
- Mutual Funds: Compare long-term growth between investments.
- Stocks: Measure the annualized growth of a stock over several years.
- Business Revenue: Measure how quickly revenue has grown over a period.
- Real Estate: Estimate annualized property value growth.
- Portfolio Analysis: Compare the historical growth of different portfolios.
Limitations of CAGR
CAGR is useful, but it does not provide a complete picture of investment performance.
- It does not show yearly gains or losses.
- It assumes a smooth compounded growth rate.
- It does not account for intermediate deposits or withdrawals.
- It is not the appropriate measure for investments with multiple irregular cash flows.
How to Calculate CAGR in Excel
You can calculate CAGR in Excel using the same mathematical formula used by this calculator.
For example, if the initial value is in cell A2, the final value is in B2, and the number of years is in C2, use:
Format the result cell as a percentage to display the CAGR clearly.
Frequently Asked Questions About CAGR
What is CAGR in simple words?
CAGR is the annualized compounded growth rate of an investment between its starting and ending values over a specific period.
How is CAGR calculated?
CAGR is calculated using the final value, initial value, and investment period: (Final Value / Initial Value)1/Years − 1.
Is CAGR the same as annual return?
CAGR represents a compounded annualized growth rate between two values. It does not show the actual return achieved in each individual year.
Can CAGR be negative?
Yes. If the final value is lower than the initial value, the calculated CAGR will be negative.
Can CAGR be used for SIP investments?
CAGR is generally suitable for a single initial investment. For SIPs or investments with multiple cash flows, XIRR is usually more appropriate.
What is the difference between CAGR and absolute return?
Absolute return measures the total percentage gain or loss, while CAGR converts the start-to-end growth into an annual compounded rate.