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CAGR Calculator

Calculate compound annual growth rate (CAGR) of an investment over time.

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Detailed Guide

What Is CAGR?

Learn about Compound Annual Growth Rate, its formula, and how to compare investment returns.

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How to Calculate & Use the CAGR Calculator

Smooth out the annual volatility of your investments with our free CAGR calculator. The Compound Annual Growth Rate (CAGR) represents the annualized rate at which an investment would grow if it grew at a steady rate over a set period. Input your initial investment value, ending value, and time horizon to find your exact annualized growth rate.

Input & Variable Breakdown:

  • Initial Value: Currency amount to be factored.
  • Ending Value: Currency amount to be factored.
  • Duration (Years): Bounded variable used in the formulas.

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Frequently Asked Questions

What is the formula for calculating CAGR?

The formula for CAGR is: CAGR = (Ending Value / Beginning Value)^(1/t) - 1, where t is the time period in years.

Why is CAGR preferred over simple average returns?

Simple average returns do not account for compounding and can distort true investment performance, especially with highly volatile assets. CAGR provides a single, annualized growth figure that represents the actual geometric progression of your capital.

What are the limitations of CAGR?

CAGR assumes a constant rate of growth over the investment horizon, ignoring real-world volatility and interim cash inflows or outflows. It is an analytical comparison tool, not a reflection of year-to-year returns.