CAGR Calculator

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CAGR is the rate of return that would be required for an investment to grow from its beginning balance to its ending one. 5paisa CAGR calculator shows you the average rate of return on your investments over a year.

It could be an investment in a business or an equity fund; evaluating their performance over the years is good. That's the Compound Annual Growth Rate (CAGR), which is the guide to help you decide if you must continue or withdraw. Use a CAGR calculator for accurate metrics.

CAGR calculates the average yearly investment return over a specified time frame and displays your investment's average annual rate of return. CAGR is a valuable tool for investors since it accurately assesses assets' growth (or fall) over time. Most of the time, an investment can't increase in value uniformly every year. Despite this, the compounding growth calculator is frequently used to contrast alternative investments.

Using the CAGR calculator, you can compare the yearly growth rate to a standard return. You can use the calculator to determine the rate of return on your investment, for instance, if you have an equity fund that has increased in value over time. The computations in this application employ the compound annual growth rate formula (CAGR Formula).

CAGR calculator (online) is a helpful tool to determine your investment's compound annual growth rate over time. To calculate the CAGR, you must enter the following three variables:

  • The originally invested amount
  • The anticipated eventual investment value
  • The number of years

The compounding growth calculator has sliders that you can forward or backward to input the initial amount invested, the final value of the investment and the duration for which you have held the investment. You can evaluate the ROI concerning an index and know the annual return of your investment each year.

The CAGR uncovers several hidden aspects of your business. Its concept is not the same as the absolute return concept because absolute returns calculate growth over the entire investment duration. But CAGR is far more accurate because it considers the increase in wealth year on year (YoY). Moreover, the 5 paisa CAGR calculator is available anytime and free of cost, which is why you save time and revenue.

The use of the CAGR calculator monthly also helps in monitoring growth over time and ensures that the profits are reinvested in the right place to grow your wealth further. It guides in reallocating your funds from low-performing investments to high-performing ones.

The CAGR calculator is not hard to find, nor is it difficult to use. Follow the steps below to use the 5paisa CAGR calculator.

Click on this link to go to the compound annual growth rate calculator page.
You can select or type the initial investment in the box provided.
Select or type the final investment amount.
Select or type the duration of the investment figures in the box provided.

Within a split second, the calculator will provide you with a detailed report comprising,

Initial investment
Final investment 
Duration over the years

The Formula to calculate CAGR is as follows:

Formula to calculate CAGR

CAGR = (FV / PV)1/n - 1

Here, 

The FV is the future value of the investment of an organization

PV is the present value of the organization's investment

N is the period in years over which the analysis takes place

You can easily find out the CAGR in real-time of any organization by entering the following variables:

  • The initial investment of the organization
  • The value of the investment after its growth
  • The time duration of the investment in years

Example for the calculation of CAGR

The PV or the initial investment of Togo and Pogo was INR 2L. It reflected growth in investment value (FV) to 24L in 10 years, so what is the CAGR of Pogo & Togo?

(24, 00,000/200,000)/ 1/10 - 1 = 28.21

To derive the CAGR percentage multiply the above amount by 100, and that equals 25.89%.

1. The CAGR calculator helps you to know how profitable your investments are and how you can use them to earn more in the future

2. The calculator not only calculates the growth of investment in an organization but can help an individual investor to decide on how much to invest in which equity or fund to earn a higher ROI

3. The calculator enables you to evaluate the growth of your various investment in comparison with relevant indices to know of an increase or decrease in your wealth

4. Depending on how well you are doing, you can bring in long-term cash inflows to help you expand and grow

5. You can compare the results the calculator reports and use it to compare your success with your competitors

6. The performance indicators can help you know where you rank in your industry

7. You can estimate or forecast the future growth of your organization

While Compound Annual Growth Rate is an important concept, it has certain downsides too. Some of the limitations of CAGR include-

Actual CAGR differs from expected CAGR

Compound Annual Growth Rate assumes growth to be constant throughout the entire time horizon of investment. This may yield results that significantly differ from the actual situation with a highly volatile investment. What this means is when using a shorter duration, the actual Compound Annual Growth Rate may differ from the expected one because of inconsistency in the anticipated rates of return with those of the past. 

Portfolio additions or withdrawals

Another limitation is that it does not take into consideration the change in value caused by investor decisions to further fund or liquidate the asset. Put simply, the Compound Annual Growth Rate doesn't consider account additions or withdrawals. So, if an investor adds funds to his portfolio, it leads to an inflated CAGR, whereas if he deletes funds from his portfolio, it leads to a deflated CAGR.

Suitable for lump sum investments

Compound Annual Growth Rate is mainly suitable for a lump-sum investment. This is because, in the case of SIP investments, the systematic investment at various time intervals is not taken into consideration as only the beginning value is taken into account for CAGR calculation.

Does not account for the investment risk

Another limitation is that it does not account for the inherent risk of an investment. When it comes to equity investment, risk-adjusted returns are more important than CAGR. 

You can use CAGR to evaluate an investment's performance over a three to five-year period. It aids in calculating the internal rate of return (CAGR) of your assets and displays the geometric mean return while accounting for compound growth.  

FAQ’s

CAGR calculator is an online tool that helps you analyze your investments and allows you to calculate the Compound Annual Growth Rate depending on the data entered by you. Apart from telling you whether your investment is earning more than the fund's cost, the CAGR calculator also tells you the rate at which your invested amount is compounding.

You can calculate Compound Annual Growth Rate online with the help of a CAGR Calculator. All you need to do to calculate the CAGR online is enter the beginning and ending value of your investment and its overall tenure of it in the calculator. The CAGR calculator will then find the CAGR return % of your investment.

The formula to calculate Compound Annual Growth Rate is:

((Ending value/beginning value)^(1/period)-1)

The key benefit of the CAGR calculator is that it allows you to do multiple iterations without any charge, to help you in better decision-making about your investment. Further, the online Compound Annual Growth Rate calculator generates the result in a few seconds, thus saving you a great deal of time. The calculator allows you to simply compare the returns of your portfolio along with comparing your CAGR returns with your cost of capital.

Using the CAGR calculator is pretty simple. 

Enter the values including the original value of the investment, the final value of the investment, and the duration of the investment.

This is it! The CAGR calculator will show you the results immediately.

Yes, the Compound Annual Growth Rate calculator is free for use without any restrictions on how many times you use it.

In most cases, a CAGR return of more than 10% is considered good. Additionally, it also depends on the type of instruments used for investment. For instance, if an investment is made in equity instruments, a Compound Annual Growth Rate return of 15-25% is considered good.

Whereas in the case of fixed instruments, a Compound Annual Growth Rate return of 8-10% is considered good. To be able to know if your investment return is good or not, you can calculate it using a CAGR Calculator online.

No, there is no benchmark or threshold for CAGR. You can, in fact, compare CAGR returns to benchmark returns, which could be your index returns or risk-free rate of return. You can use a Compound Annual Growth Rate calculator to know if the CAGR returns of your investment are more than the actual cost of funds.

No, CAGR is not an indicator of investment risks for investors. You need to compare your Compound Annual Growth Rate return to the benchmark return to be able to decide if it is enough to cover your cost of capital.

You can use a Compound Annual Growth Rate calculator to calculate the return percentage in your investment over some time. Whether it is Equity CAGR, mutual fund CAGR or FD CAGR, you should carefully analyze the CAGR return you will be achieving and whether it is sufficient or not. It helps you to make investment decisions based on aspects such as cost and return on investment.
 

CAGR return is the average return earned on all your investments made in a year.

In general, the Compound Annual Growth Rate is a comparatively better performance indicator than the IRR or Internal Rate of Return since it is indicative of overall financial health and stability.

The biggest limitation of the CAGR formula is that it does not take into account the risk or the uncertainty related to returns on your investment. The Compound Annual Growth Rate formula simply implies that the interim cash flows between the beginning of the investment and its maturity are reinvested as the CAGR formula helps you measure the return rate based on the portfolio’s initial and final balance.

Yes. While absolute return simply gives you the total growth in the investment value and does not consider the period, the Compound Annual Growth Rate or CAGR return gives you the average yearly growth rate in the investment.