CAGR Calculator
Calculate Compound Annual Growth Rate of your investments
Investment Details
About CAGR
The Compound Annual Growth Rate (CAGR) is 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 individual assets.
CAGR Results
Your Investment Grew at
14.3%
annualized rate
Initial Investment
$10,000
Final Value
$19,500
Total Growth
95%
Time Period
5 years
Yearly Growth
| Year | Value | Growth |
|---|
Understanding CAGR
What is CAGR?
The Compound Annual Growth Rate (CAGR) is a useful measure of growth over multiple time periods. It describes the rate at which an investment would have grown if it grew at a steady rate.
CAGR Formula
CAGR = (Ending Value / Beginning Value)1/Number of Years – 1
Why Use CAGR?
- Smoothes out investment returns
- Allows comparison between different investments
- Provides a clearer picture of long-term performance
- Helps in setting realistic investment expectations
CAGR Formula & How to Use It
The Compound Annual Growth Rate (CAGR) is one of the most reliable metrics to evaluate investment performance over time. Unlike simple average returns, CAGR accounts for the effect of compounding, giving you the annualized rate that would produce the same final value if the investment grew at a constant rate. The formula is:
For example, if you invested $10,000 and after 5 years it grew to $19,500, the CAGR is (19,500/10,000)(1/5) – 1 ≈ 0.143 = 14.3%. This means your investment grew at an average annual rate of 14.3% compounded each year.
🧮 Including Regular Contributions
Our calculator also supports additional periodic contributions. When you check the “Include regular contributions” box, you can add monthly, quarterly, or annual deposits. The CAGR calculation then becomes more complex – it solves for the rate that makes the present value of all contributions equal to the final value. (Note: for simplicity, the current implementation still uses the standard formula; in a full‑featured version you would use an iterative solver. We recommend using the checkbox as a placeholder for future enhancements.)
📈 Why CAGR Matters
- Comparability: Compare different investments regardless of volatility.
- Goal setting: Determine required annual return to reach a target.
- Performance measurement: Evaluate fund managers or stock picks.
- Inflation adjustment: Compare real returns after inflation.
❓ Frequently Asked Questions
Q: What is the difference between CAGR and average annual return?
Average annual return simply adds yearly returns and divides by number of years, ignoring compounding. CAGR gives the actual geometric average, which is lower when returns are volatile.
Q: Can CAGR be negative?
Yes, if the final value is less than the initial investment, CAGR will be negative, indicating a loss on an annualized basis.
Q: How do I use CAGR for SIP (Systematic Investment Plan)?
For regular contributions, CAGR is not directly applicable; you need XIRR (extended internal rate of return). Our tool includes a checkbox for contributions, but for precise SIP returns you may need a dedicated XIRR calculator.
Q: Does CAGR assume reinvestment of dividends?
Yes, CAGR inherently assumes that all earnings (dividends, interest) are reinvested, which is why it accurately reflects total return.
Q: Is CAGR the same as annualized return?
Yes, in finance, “CAGR” and “annualized total return” are used interchangeably.
⚠️ Disclaimer
Finance ToolBajar’s CAGR calculator is for educational and planning purposes only. It does not constitute financial advice. Actual investment returns may vary due to market conditions, taxes, and fees. Past performance does not guarantee future results. Always consult a qualified financial advisor before making investment decisions.
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