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CAGR Calculator (Compound Annual Growth Rate)

Determine the annual growth rate of investments over a specific time period.

One Lakh Rupees Only

Starting value of your investment

One Lakh Fifty Thousand Rupees Only

Ending value of your investment
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Investment duration period
Used for real CAGR calculations (inflation-adjusted returns)

Compound Annual Growth Rate (CAGR)

CAGR is a measure of the mean annual growth rate of an investment over a specified time 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 Benefits:

  • • Smooths out volatility
  • • Easy to compare investments
  • • Accounts for compound growth
  • • Standardized performance metric

Use Cases:

  • • Investment portfolio analysis
  • • Business growth measurement
  • • Fund performance comparison
  • • Long-term financial planning

Calculation Formulas

Compound Annual Growth Rate:
CAGR = (Final Value / Initial Value)^(1/n) - 1
Where n = number of years
Total Growth:
Total Growth = Final Value - Initial Value
Real CAGR (inflation-adjusted):
Real CAGR = CAGR - Inflation Rate
CAGR = Compound Annual Growth Rate
n = Number of years
Real CAGR = Inflation-adjusted returns
Growth % = Total percentage growth
Note: CAGR smooths out volatility and provides a standardized way to compare investment performance over different time periods.

About CAGR Calculator (Compound Annual Growth Rate)

What is Compound Annual Growth Rate (CAGR)?

The Compound Annual Growth Rate (CAGR) is a financial metric that represents the mean annual growth rate of an investment over a specified time period longer than one year. It provides a smoothed annualized return that eliminates the volatility of periodic returns, giving you a clear picture of how an investment has grown over time. Unlike simple averages, CAGR accounts for the compounding effect of investment returns, making it the most accurate way to calculate and compare returns for investments, business metrics, or economic data over multiple periods.

Why CAGR Matters in Investing

Performance Measurement

CAGR helps investors compare the historical performance of different investments (stocks, mutual funds, ETFs) over the same time period, regardless of their volatility or growth patterns.

Investment Planning

By understanding past CAGR, investors can make more informed projections about future growth potential and set realistic financial goals.

Business Analysis

Companies use CAGR to analyze revenue growth, customer acquisition rates, market expansion, and other key business metrics over time.

Portfolio Management

Financial advisors use CAGR to assess portfolio performance and make asset allocation decisions based on long-term growth trends.

How CAGR Differs from Other Growth Metrics

CAGR
  • • Smooths growth over entire period
  • • Accounts for compounding
  • • Ignores volatility
  • • Single growth rate for entire period
Average Annual Return
  • • Simple average of yearly returns
  • • Doesn't account for compounding
  • • Can be misleading for volatile investments
  • • Often higher than CAGR
Absolute Return
  • • Total return over entire period
  • • Doesn't annualize the return
  • • Doesn't show year-over-year growth
  • • Hard to compare different time periods

The CAGR Formula

The mathematical formula for CAGR is:

CAGR = (Ending Value / Beginning Value)(1/n) - 1
Variables Explained
  • • Ending Value = Final value of investment
  • • Beginning Value = Initial investment amount
  • • n = Number of years in investment period
  • • Result is expressed as a decimal (multiply by 100 for %)
Example Calculation
  • • Initial investment: $10,000
  • • Value after 5 years: $16,105
  • • (16,105 / 10,000)(1/5) - 1 = 0.10
  • • CAGR = 10%
  • • Shows consistent 10% annual growth

Common Uses of CAGR

Investment Analysis
  • • Comparing stock performance
  • • Evaluating mutual fund returns
  • • Assessing real estate appreciation
  • • Analyzing retirement account growth
Business Metrics
  • • Revenue growth tracking
  • • Customer base expansion
  • • Market share development
  • • Profit margin improvement
Economic Indicators
  • • GDP growth rates
  • • Industry sector growth
  • • Inflation rate comparisons
  • • Demographic changes
Personal Finance
  • • Retirement planning
  • • Education savings growth
  • • Wealth accumulation tracking
  • • Debt repayment progress

Limitations of CAGR

While CAGR is a valuable metric, it has important limitations to consider:

Volatility Masking
  • • Doesn't show year-to-year fluctuations
  • • Two investments with same CAGR may have very different risk profiles
  • • Doesn't account for sequence of returns risk
Assumption Limitations
  • • Assumes smooth, consistent growth
  • • Doesn't reflect cash flows during period
  • • Past CAGR doesn't guarantee future returns

CAGR vs. IRR: Key Differences

FeatureCAGRIRR (Internal Rate of Return)
Cash FlowsOnly beginning and ending valuesAccounts for multiple cash flows
CompoundingAssumes reinvestment at same rateCalculates actual rate based on cash flows
ComplexitySimple calculationMore complex calculation
Best ForSingle lump-sum investmentsInvestments with multiple contributions/withdrawals

Real-World CAGR Examples

Stock Market Returns

The S&P 500 has delivered a CAGR of approximately 10% before inflation over the past 100 years (1926-2023), though with significant volatility in shorter periods.

Tech Company Growth

Amazon achieved a remarkable 38% CAGR in revenue from 1995-2020, growing from $0.5 million to $386 billion, demonstrating the power of sustained high growth rates.

Emerging Markets

China's GDP grew at a 9% CAGR from 1980-2020, transforming from a primarily agricultural economy to the world's second-largest economy during this period.

Using Our CAGR Calculator

Our CAGR calculator simplifies the process of determining your investment's annualized growth rate. Simply enter your initial investment value, final value, and the number of years to instantly calculate your CAGR. The calculator can also project future values based on historical CAGR, helping you set realistic financial goals and compare different investment opportunities.

For more complex scenarios with multiple cash flows, consider using our IRR calculator. However, for straightforward growth analysis of lump-sum investments, CAGR provides the clearest picture of annualized performance.

Tips for Interpreting CAGR

Context Matters
  • • Always consider the time period
  • • Compare to relevant benchmarks
  • • Look at economic conditions during period
Supplement with Other Metrics
  • • Review standard deviation of returns
  • • Examine maximum drawdown
  • • Consider Sharpe ratio for risk-adjusted returns

Historical CAGR Benchmarks

Asset Class CAGRs (1928-2023)
  • • Large Cap Stocks: 10.2%
  • • Small Cap Stocks: 12.1%
  • • Long-Term Government Bonds: 5.4%
  • • Treasury Bills: 3.3%
  • • Inflation: 3.0%
Sector CAGRs (20 Years)
  • • Technology: 11.5%
  • • Healthcare: 9.8%
  • • Consumer Discretionary: 9.2%
  • • Utilities: 6.5%
  • • Energy: 5.9%

Frequently Asked Questions

What is CAGR?
CAGR (Compound Annual Growth Rate) is the mean annual growth rate of an investment over a specified time period longer than one year. It represents a smoothed annualized return that eliminates the volatility of periodic returns.
How is CAGR calculated?
CAGR = (Ending Value / Beginning Value)^(1/n) - 1, where n is the number of years. Example: $10,000 growing to $16,000 over 3 years has CAGR = (16,000/10,000)^(1/3)-1 = 16.96%.
Why use CAGR instead of average returns?
CAGR accounts for compounding effects while simple averages don't. It shows the consistent annual growth rate needed to go from beginning to ending value, making it better for comparing investments.
What's the difference between CAGR and annualized return?
They're essentially the same. Both measure geometric average growth accounting for compounding. CAGR specifically refers to the calculation over multi-year periods.
Can CAGR be negative?
Yes, negative CAGR indicates an investment lost value over the period. For example, $10,000 dropping to $7,000 over 2 years has CAGR = -16.33%.
How does the calculator handle partial years?
Convert partial years to decimals (e.g., 3 years 6 months = 3.5). The formula remains the same: CAGR = (EV/BV)^(1/n)-1 where n is in years (can be fractional).
What are the limitations of CAGR?
CAGR doesn't show volatility - two investments with same CAGR may have very different risk. It also assumes smooth growth and ignores cash flows during the period.
How is CAGR different from absolute return?
Absolute return shows total percentage change (e.g., +60%), while CAGR shows annualized growth rate (e.g., 16.96% annually). CAGR is better for comparing different time periods.
What's a good CAGR for investments?
Historically, 7-10% CAGR is good for stocks long-term. 15%+ is exceptional. Context matters - compare to relevant benchmarks (S&P 500 averages ~10% CAGR since 1926).
How do I calculate CAGR for monthly data?
First convert months to years (n = total months ÷ 12). Then use standard CAGR formula. Example: 18 months = 1.5 years; $5,000 to $6,500 gives CAGR = (6,500/5,000)^(1/1.5)-1 = 18.56%.
Can I use CAGR for declining values?
Yes, CAGR works for depreciation too. Example: A car's value dropping from $30,000 to $18,000 over 4 years has CAGR = -13.40%, showing its annual depreciation rate.
How does the calculator handle multiple cash flows?
For multiple investments/withdrawals, use XIRR (extended internal rate of return) instead. Our calculator has a separate XIRR mode for irregular cash flows.
What's the Rule of 72 in relation to CAGR?
Rule of 72 estimates doubling time: 72 ÷ CAGR ≈ years to double. At 8% CAGR, money doubles in ~9 years (72 ÷ 8 = 9). Works for quick mental estimates.
How is CAGR used in business?
Businesses use CAGR to analyze: revenue growth, customer acquisition rates, market expansion, profit margin improvement, and other KPI growth over time.
What's the difference between CAGR and rolling returns?
CAGR gives one growth rate for the entire period. Rolling returns show CAGRs for all possible sub-periods within that timeframe, better revealing volatility.
How accurate is CAGR?
CAGR is mathematically precise for the given inputs, but doesn't reflect actual year-to-year fluctuations. It's an idealized growth rate assuming steady compounding.
Can CAGR exceed 100%?
Yes, for extremely high growth. Example: $1,000 to $15,000 in 3 years has CAGR = 146.97%. This means the investment more than doubles every year on average.
How do I calculate future value using CAGR?
Future Value = Present Value × (1 + CAGR)^n. Example: $10,000 at 7% CAGR for 5 years = $10,000 × (1.07)^5 = $14,025.52.
What's the difference between CAGR and IRR?
CAGR assumes single initial investment, no additions/withdrawals. IRR (Internal Rate of Return) handles multiple cash flows. For single investments, CAGR = IRR.
How does inflation affect CAGR?
Nominal CAGR includes inflation. For real CAGR: [(1+nominal CAGR)/(1+inflation rate)]-1. Example: 8% CAGR with 2% inflation = real CAGR of 5.88%.
What's the CAGR formula in Excel?
= (EV/BV)^(1/n)-1 or use RRI function: =RRI(n,BV,EV). Our calculator replicates these Excel functions with additional visualization tools.
How is CAGR used in mutual fund analysis?
Funds advertise CAGR for 3/5/10-year periods to show long-term performance. Compare funds with similar objectives using same-period CAGRs.
What's the difference between forward and trailing CAGR?
Trailing CAGR looks backward at historical growth. Forward CAGR projects future growth based on assumptions. Our calculator can model both scenarios.
How do dividends affect CAGR?
For total return CAGR, include reinvested dividends in Ending Value. Price-only CAGR ignores dividends. Always specify which you're calculating for accurate comparisons.
What's a good CAGR for startups?
Successful startups often show 100-200%+ CAGR in early years, slowing to 30-50% as they mature. Compare to industry benchmarks - SaaS companies average ~30% CAGR.
How does the calculator handle stock splits?
Adjust all historical prices for splits before calculating CAGR. Our calculator has a split-adjustment tool to maintain accurate basis calculations.
What's the difference between CAGR and annualized volatility?
CAGR shows average growth, while volatility measures how much returns fluctuate around that average. Both are important - high CAGR with high volatility may be risky.
How is CAGR used in real estate?
Real estate investors use CAGR to compare: property appreciation rates, rental income growth, REIT performance, and portfolio growth across different markets.
What's the difference between geometric and arithmetic mean?
CAGR is geometric mean (accounts for compounding). Arithmetic mean sums returns ÷ years (overstates growth). For volatile investments, arithmetic mean > geometric mean.
How do I annualize quarterly growth rates?
Convert quarterly to CAGR: [(1+q1)×(1+q2)×(1+q3)×(1+q4)]^(1/4)-1. Our calculator can convert between periodic and annualized growth rates automatically.
What's the CAGR of the S&P 500?
Historically, S&P 500 CAGR is ~10% (1926-present). Recent 20-year CAGR (2003-2023) is ~9.5%. These figures include reinvested dividends.
How does the calculator handle currency effects?
For foreign investments, first convert all values to one currency using historical exchange rates, then calculate CAGR. Our tool can model currency impacts separately.
What's the difference between CAGR and ROI?
ROI shows total return (e.g., +150%), while CAGR shows annualized growth rate (e.g., 20% per year). ROI is better for single periods, CAGR for multi-year comparisons.
How is CAGR used in marketing analytics?
Marketers track CAGR for: customer base growth, revenue per user, campaign ROI, market share gains, and other KPIs to measure strategy effectiveness over time.
What's a good CAGR for a portfolio?
A well-diversified portfolio might target 7-10% CAGR long-term. Compare to your benchmarks - the 60/40 stock/bond portfolio has averaged ~8.5% CAGR historically.
How does the calculator handle negative starting/ending values?
CAGR can't be calculated for negative values. Our calculator flags this error and suggests alternative metrics like absolute return for such cases.
What's the difference between CAGR and total return?
Total return shows cumulative gain (e.g., +250%). CAGR expresses this as annualized rate (e.g., 12% per year). Both useful - total return for magnitude, CAGR for comparison.
How is CAGR used in economic indicators?
Economists calculate CAGR for: GDP growth, industry expansion, inflation rates, demographic changes, and other macroeconomic trends over multi-year periods.
What's the CAGR formula for monthly returns?
Convert monthly to annual CAGR: (End Value/Beg Value)^(12/n)-1, where n is total months. Example: $1,000 to $1,200 in 15 months: (1200/1000)^(12/15)-1 = 15.83%.
How does the calculator handle missing data points?
CAGR requires beginning and ending values only. For missing interim data, our calculator can estimate periodic returns or show range-based CAGRs with confidence intervals.
What's the difference between CAGR and logarithmic returns?
Both measure compound growth. Logarithmic returns are additive across periods while CAGR is geometric. For small returns, they're similar; diverge for large fluctuations.
How is CAGR used in personal finance?
Individuals use CAGR to track: investment portfolio growth, retirement account performance, wealth accumulation, debt payoff progress, and savings goal achievement.
What's a good CAGR for cryptocurrency?
Cryptos have shown extreme CAGRs (Bitcoin ~200% since 2010) but with high volatility. More established coins may settle to 20-50% CAGRs long-term, still above traditional assets.
How does the calculator handle dividend reinvestment?
Include reinvested dividends in Ending Value for total return CAGR. Our calculator has a DRIP mode that automatically compounds dividends at payment dates.
What's the difference between CAGR and Sharpe ratio?
CAGR measures growth, Sharpe ratio measures risk-adjusted return (CAGR minus risk-free rate, divided by volatility). Both useful - CAGR for growth, Sharpe for efficiency.
How is CAGR used in private equity?
PE firms use CAGR to evaluate: portfolio company growth, fund performance, exit multiples, and compare deals. Strong PE funds target 20-30%+ CAGRs.
What's the CAGR of gold as an investment?
Gold's 50-year CAGR (1973-2023) is ~7.5%. Recent 20-year CAGR is ~8.3%. Unlike stocks, gold's CAGR comes entirely from price appreciation (no dividends).
How does the calculator handle fees and expenses?
Subtract all fees from Ending Value before calculating CAGR. Our tool has an expense adjustment feature that accounts for management fees, transaction costs, etc.
What's the difference between CAGR and maximum drawdown?
CAGR shows average growth, max drawdown shows worst peak-to-trough decline. Together they indicate both return potential and risk - high CAGR with low drawdown is ideal.
How is CAGR used in venture capital?
VCs use CAGR to evaluate: startup revenue growth, portfolio company valuations, fund returns, and compare investment stages (seed vs late-stage typically have different CAGRs).
What's the best way to use this CAGR calculator?
1) Input beginning/ending values and period 2) Compare multiple investments 3) Model future growth 4) Adjust for inflation/fees 5) Benchmark against alternatives 6) Track progress over time.

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