CAGR Calculator

When you invest in mutual funds, stocks, or other instruments, you often want to know how much your investment has grown over time. Absolute returns tell you the total gain or loss, but they do not show the consistent yearly rate of growth. The Compound Annual Growth Rate (CAGR) fills this gap by giving you a single annualized rate that represents the smooth growth of your investment over the chosen period.

CAGR is one of the most commonly used metrics to compare investments, evaluate fund performance, and set realistic expectations for future returns. Using a CAGR calculator helps you make informed decisions and maintain uniformity in how you measure growth across different assets and time periods.

What is a CAGR Calculator?

A CAGR calculator is an online tool that computes the compound annual growth rate of an investment. You provide the beginning value (e.g. initial investment), the ending value (e.g. current or maturity value), and the time period in years. The calculator then applies the CAGR formula and displays the result as a percentage.

CAGR is useful because it ignores short-term volatility and reflects the average rate at which the investment would have grown each year if growth had been steady. It allows you to compare investments of different tenures and amounts on a common scale.

How does a CAGR Calculator Work?

The CAGR calculator uses the following formula:

CAGR = (Ending Value / Beginning Value)^(1 / Number of Years) - 1

The result is typically expressed as a percentage. For example, if your investment grew from Rs 1,00,000 to Rs 2,00,000 over 5 years, the CAGR would be calculated as:

CAGR = (2,00,000 / 1,00,000)^(1/5) - 1 = (2)^0.2 - 1 ≈ 14.87%

This means your investment grew at an average rate of about 14.87% per year over the 5-year period.

How to use the CAGR Calculator?

Here's how to use the CAGR calculator:

• Enter the Beginning Value – the initial amount invested or the value at the start of the period.
• Enter the Ending Value – the final amount or current value of the investment.
• Enter the Time Period (Years) – the number of years between the beginning and ending values.

The calculator will instantly show the CAGR percentage. You can adjust the values using the sliders or input fields to compare different scenarios.

Benefits of CAGR Calculator

Following are the benefits of the CAGR calculator:

• Helps you compare returns across different investments and time periods on a uniform basis.
• Gives a clear, single number (annualized growth rate) that is easy to understand and communicate.
• Useful for evaluating mutual fund performance, stock returns, and other investment products.
• Assists in financial planning by showing the growth rate needed to reach a target amount from a given starting value.

Important points to note

CAGR assumes that the investment grew at a constant rate every year, which is rarely the case in reality. It does not account for volatility, intermediate cash flows, or the risk of the investment. Use CAGR as one of several tools to evaluate performance, and consider other factors such as risk, liquidity, and your financial goals before making investment decisions.