CAGR Calculator
Calculate Compound Annual Growth Rate
What is CAGR?
CAGR (Compound Annual Growth Rate) is the rate at which an investment would have grown if it grew at a steady rate every year over a given time period.
Where n = number of years
Frequently Asked Questions
What is CAGR and how is it calculated?
CAGR (Compound Annual Growth Rate) measures the mean annual growth rate of an investment over a specified period longer than one year. It is calculated using the formula: CAGR = (Ending Value / Beginning Value)^(1/Number of Years) - 1, which smooths out volatility to show a steady rate of return.
What is a good CAGR for investments?
A good CAGR depends on the asset class and market conditions. For equity investments, a CAGR of 12-15% over 5-10 years is considered strong, while fixed-income instruments typically deliver 6-8%. Always compare CAGR against inflation (around 5-6% in India) to assess real returns.
How is CAGR different from absolute return?
Absolute return shows the total percentage gain or loss over the entire investment period without considering time. CAGR, on the other hand, annualizes the return so you can compare investments held for different durations on an equal footing.
Can CAGR be negative?
Yes, CAGR can be negative when the ending value of an investment is lower than the beginning value. A negative CAGR indicates that the investment lost value on average each year over the measured period.
Why is CAGR better than average annual return?
Average annual return simply averages yearly returns and can be misleading due to volatility. CAGR accounts for compounding and gives the actual annualized rate at which an investment grew, making it a more accurate measure of long-term performance.