CAGR Calculator
Use this tool to calculate the Compound Annual Growth Rate (CAGR) for your investments. Adjust the sliders to see how different values affect your final growth percentage.
CAGR
How CAGR Calculator Works
CAGR represents the **annual growth rate of an investment** over a specified period. The formula used for CAGR is:
Where:
FV = Final Value
IV = Initial Value
n = Number of Years
When it comes to assessing the growth of your investments, one of the most important concepts you'll encounter is CAGR (Compound Annual Growth Rate). It's a powerful metric that helps investors evaluate how much their investments have grown over time, accounting for the effects of compounding. At FinanceMadeEasy (www.financemadeeasy.in), we offer an easy-to-use CAGR Calculator that helps you calculate the compound annual growth rate of your investments.
What is CAGR (Compound Annual Growth Rate)?
CAGR is the rate at which an investment grows annually over a specified period of time, assuming the growth is compounded. It allows you to understand how your investments have performed year over year, on average.
CAGR is crucial because it gives a smoother, more accurate measure of your investment's growth compared to simply averaging returns year over year. This is especially important when you have fluctuating returns, as CAGR accounts for the compounding effect—reinvesting your returns to generate additional growth.
In simple terms, CAGR answers the question: If your investment grew at a steady rate every year, what would that rate be?
How the CAGR Calculator Works
At FinanceMadeEasy, we’ve made it easy for you to calculate CAGR using our intuitive CAGR Calculator. All you need to do is input the following basic details:
- Beginning Investment Value: The amount you initially invested.
- Ending Investment Value: The value of your investment at the end of the period.
- Number of Years: The duration of your investment in years.
The CAGR Calculator will then provide you with the CAGR rate that reflects the annual growth rate of your investment over the chosen period.
Example of Using the CAGR Calculator
Let’s say you invested ₹50,000 in a mutual fund 3 years ago, and your investment has grown to ₹75,000 today. Using the CAGR Calculator on FinanceMadeEasy:
- Beginning Value: ₹50,000
- Ending Value: ₹75,000
- Time Period: 3 years
The CAGR Calculator will show you the CAGR as approximately 14.87%. This means that your investment grew at an average annual rate of 14.87% over the 3-year period.
Frequently Asked Questions (FAQ)
What is CAGR?
CAGR stands for Compound Annual Growth Rate, and it measures the rate of return on an investment over a specified period of time, assuming the investment grows at a consistent rate each year.
How does the SIP CAGR Calculator work?
The SIP CAGR Calculator calculates the annualized return of a Systematic Investment Plan (SIP), factoring in regular contributions and compounded returns. It provides insight into how much your SIP investments have grown over time.
How do I use the CAGR Calculator on FinanceMadeEasy?
To use the CAGR Calculator, simply enter your beginning investment value, ending value, and the number of years you’ve held the investment. The calculator will then calculate the average annual return, allowing you to assess how well your investment has performed.
Can the CAGR Formula be used in Excel?
Yes! You can calculate CAGR in Excel using the following formula:
CAGR = (Ending Value / Beginning Value) ^ (1 / Number of Years) – 1Is CAGR the same as ROI?
No, CAGR is different from ROI (Return on Investment). ROI looks at the total return from an investment, while CAGR shows the average annual return over a period of time, accounting for compounding.