CAGR Calculator
Calculate Compound Annual Growth Rate for your investments and business performance
About CAGR
CAGR (Compound Annual Growth Rate) is a measure of the mean annual growth rate of an investment over a specified period longer than one year. It represents one of the most accurate ways to calculate returns for anything that can rise or fall in value over time.
Benefits:
- Accurate growth measurement
- Easy comparison between investments
- Considers time value of money
- Smooths out volatility
Frequently Asked Questions
What is CAGR?
CAGR stands for Compound Annual Growth Rate. It's the mean annual growth rate of an investment over a specified period longer than one year. It represents the rate at which an investment would have grown if it had grown at the same rate every year.
How is CAGR calculated?
CAGR is calculated using the formula: CAGR = (Final Value / Initial Value)^(1/Number of Years) - 1. This formula gives you the annual growth rate that would take your initial investment to the final value over the specified period.
Why is CAGR important for investors?
CAGR is important because it provides a smoothed annual growth rate that eliminates the effects of volatility and gives you a clear picture of how your investment has performed over time. It allows for easy comparison between different investments.
What is a good CAGR percentage?
A good CAGR percentage varies by investment type and market conditions. Generally, a CAGR of 8-12% is considered good for stock market investments, while 12-15% or higher is considered excellent. However, this depends on the risk level and time period.
How does CAGR differ from absolute returns?
Absolute returns show the total percentage increase from initial to final value, while CAGR shows the annualized growth rate. For example, a 100% absolute return over 5 years means CAGR of approximately 14.87% per year, as CAGR considers the compounding effect.