CAGR Calculator – Calculate Your Annual Growth Rate
CAGR (Compound Annual Growth Rate) is the average annual growth rate of an investment over a specified time period. It's a useful metric to compare the performance of different investments. Use this calculator to determine the CAGR of your investment based on its initial and final values.
Calculate Your CAGR
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 one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time. CAGR smooths out the volatility and provides a single number that represents the annualized return.
How is CAGR different from simple return?
Simple return calculates the total return over the period and divides by the number of years, which doesn't account for compounding. CAGR, on the other hand, accounts for the compounding effect and provides the annualized growth rate. For example, if an investment doubles in 5 years, the simple return would be 20% per year, but the CAGR would be approximately 14.87% per year, which is more accurate as it accounts for compounding.
Why investors use CAGR instead of just looking at total return?
CAGR is useful because it provides a standardized way to compare investments of different durations and sizes. It smooths out volatility and gives a clear picture of the annual growth rate, making it easier to compare different investment options. Total return can be misleading when comparing investments over different time periods, while CAGR normalizes the comparison by providing an annualized figure.