CAGR Calculator
Calculate the Compound Annual Growth Rate of your investments.
Compound Annual Growth Rate (CAGR)
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Measuring Investment Growth with CAGR
The Compound Annual Growth Rate (CAGR) is a crucial metric for investors to measure the performance of an investment over a specific period. Unlike simple returns, CAGR provides a smoothed average annual return, giving you a more accurate picture of how your investment has grown on a compounded basis. This tool makes it easy to calculate CAGR by simply entering the initial and final values of your investment, along with the time period in years.
Frequently Asked Questions (FAQ)
What is CAGR?
CAGR stands for Compound Annual Growth Rate. It is the rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each year of the investment’s lifespan.
How is CAGR calculated?
The formula for CAGR is: ((Ending Value / Beginning Value)^(1 / Number of Years)) - 1. This calculator uses this formula to provide an accurate growth rate, which is then expressed as a percentage.
Why is CAGR a useful metric for investors?
CAGR is a useful metric because it provides a smoothed-out average annual growth rate, which can be more representative of an investment's performance over time than simple annual returns, as it accounts for the effect of compounding.
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