# CAGR Calculator

Compounded Annual Growth Rate (CAGR) calculator allows you to ascertain the rate of growth in an investment over a period of time.

Initial Investment

Final Value Cost

Duration of Investment

Yrs

1 Yr

30 Yrs

CAGR (%)

## 0%

Initial Value Amount

₹10,000

Final Value

₹25,000

₹0 on Stock Investments & Flat ₹20 on Intraday & F&O

Make a lumpsum investment in the market today and benefit from compounding power.

## What is Compounding?

In investing, compounding refers to earning interest not only on the initial investment but with each additional amount of interest over time. This creates a snowball effect where the original investment grows by a higher absolute value in each consecutive period. Compounding is a powerful tool for building long-term wealth, as the returns on an investment compound over time. Therefore, the longer a person holds an investment, the more significant its compounding effect becomes.

## What is CAGR?

CAGR refers to Compounded Annual Growth Rate, which is a measure of how much an investment has grown over a period of time. It takes into account both the initial investment and the final value, averaging your growth rates from year to year. This metric is especially useful for long-term investments, as it smooths out fluctuations in returns over time.

## Difference Between CAGR Vs Absolute Returns

Absolute value is the overall gain that an investment has made over time. Calculating absolute return is pretty simple. The absolute return formula is as follows:

Absolute Returns (%) = [(Current Value / Initial Investment Value) – 1] * 100

For instance, if you initially invest ₹1,00,000, which grows to ₹1,79,000, then

Absolute Returns = [(1,79,000 / 1,00,000) – 1] * 100

Absolute Returns = 79%

In this case, the investment has returned 79%, but we are unclear about how long it took to generate such high returns.

To elaborate, if you were given the option to either invest in Fund A, which has grown by 12% or Fund B, which has grown by 8%, would fund A necessarily be a good choice under all circumstances? It will actually depend on how long it took to generate such returns—something that a CAGR calculation can help clarify.

This is because CAGR would consider the growth experienced per year, instead of different number of years.

## What is a CAGR Calculator?

As an investor, you have to make smart decisions about your money. A CAGR calculator can help you achieve that goal. The CAGR calculator is a free calculation tool available online on the Angel One website.

Using the CAGR calculator, you can:

1. Calculate the CAGR of any investment, provided you already know the initial value, the current value, and the duration of the investment.
2. Know the CAGR, which will help you determine how fast and efficiently your investments are growing with time.
3. Knowing the rate of growth helps you evaluate which investment options are performing better compared to others.

## How Does the CAGR Calculator Work?

A CAGR calculator is a free online calculator available on the Angel One website. It helps you calculate the compound annual growth rate of any investment. You just have to enter the values of the initial investment, the current value of the investment and the time taken by the investment to reach its current value. The calculator will show you the CAGR that was required to reach that level of absolute returns. The calculator is able to do so based on the CAGR formula that is working on the backend of the calculator.

The CAGR calculator helps you find the yearly rate of growth of any variable, if you already know the starting value, end value and duration. Since it shows the average growth rate over time, it smoothens out any volatility that might have happened in certain periods in order to give you a general figure. It shows you the efficiency of the growth of a variable and not just overall growth. For example, if you are an investor, you can use the CAGR calculator to check how fast your portfolio is growing over the years.

## How to Calculate CAGR?

The following is the CAGR formula that is used to calculate the CAGR of an investment or any other metric that can grow over the years:

CAGR = [(End Value/Start Value)^(1/n) – 1]*100

Where,

n = Number of years

Suppose you bought some shares of a company at the beginning of 2018 at ₹10,000, held it for 5 years, and the current value of those shares in 2023, i.e. after 5 years, is ₹15,000. In that case,

Start Value = ₹10,000
n = 5
End Value = ₹15,000
CAGR = [15,000/10,000]^(⅕) -1 = 0.845
So the CAGR on your investment after 5 years would be 0.845 or 8.45 %.

## How to Use Angel One CAGR Calculator?

In order to use the Angel One CAGR calculator, you simply have to enter the following values into the calculator:

1. Initial investment - Enter the amount of money you had invested.
2. Final value cost - Enter the current value of the investment(s) whose CAGR you are measuring.
3. Duration of investment - Enter the number of years for which the investment was held.

After inputting these values, the calculator instantaneously gives you the CAGR for the investments for that specific period of time using the above formula.

If we take the above example of buying shares, then you simply have to take the following steps to find out the CAGR of the investment:

1. Enter the Initial Investment as ₹10,000.
2. Enter the Final Value Cost as ₹15,000.
3. Enter the Duration of Investment as 5

The CAGR calculator will automatically show you that the CAGR of that particular investment is 8.45 %.

The following are some of the advantages of a CAGR calculator:

1. Instant calculation - Once you enter the values in the required fields, the CAGR calculator immediately provides you with the CAGR value in percentage form.
2. Easy calculation and comparison - Using the CAGR calculator, you can easily find out the CAGR of multiple investments in a matter of minutes. Thereafter you can compare them based on the CAGR and find out which investment gives you the highest annual returns.
3. Free access - The CAGR calculator on the Angel One website is completely free of charge, regardless of how many times you use it.
4. Convenient - You can easily access the CAGR calculator from anywhere using a device with internet access.

## FAQs

How do you convert CAGR to annual growth? CAGR depicts average growth rate over the years on an investment or loan when it is compounding. It smooths out fluctuations and let you get an idea of how your money will perform during the tenure. It is a ratio of the final value and the beginning value of the investment, calculated over a period.
Average Annual Growth Rate is a linear averaging formula and doesn’t take into account the effects of compounding.

What is a good CAGR percentage? The value of a good CAGR percentage will vary with the kind of investment you have made. For equities, if your portfolio is growing at a CAGR of 18-25 percent, you are doing well. Similarly, for other types of investments, you can calculate different CAGR. However, remember, that CAGR is only average growth percentage, the actual growth value of your investment can be more or less than CAGR.
To avoid the trouble of complex calculation, use an online compound interest calculator.
Why is CAGR important? Compounded annual growth rate (CAGR) represents the average rate at which an investment grows year on year. If an asset is said to have grown at 10 percent CAGR, it means the average appreciation was 10 percent. CAGR smooths out interim volatility and presents a steady rate of growth.
What does 5-year CAGR mean? CAGR is a good measure to compare the performance of different investments over time. Suppose you want to invest in company XYZ, calculating 5-year CAGR of sales will help you decide if the company will grow with time.
To calculate 5-year CAGR, you can take help of a CAGR return calculator.
Can you use CAGR for months? Yes, you can. Like CAGR, which computes average annual growth rate, CMGR calculates average monthly growth.
The formula of calculating CMGR is the same; you need to replace the number of years with months, that is 12.
CMGR= (end value/beginning value)^(1/n) – 1
Here n = investment period, while calculated monthly growth n represents the number of months in the year.
You can use an online CAGR calculator to calculate the growth rate, but calculators often give you annual value. Select a calculate that allows you to adjust the duration to months.
What is a promising CAGR for a company? CAGR isn’t a fixed value. It varies by industry, company size, and more. However, as a rule of thumb, 5-10 percent annual growth in sales is considered decent for large-cap companies. For small and medium-cap companies, 10 percent growth rate is achievable.
If you want to calculate company growth before investing, use a CAGR return calculator that is available online.
Why is CAGR better than average? Whether you should calculate CAGR or AAGR (annual average growth rate) depends on your purpose. However, in most cases, calculating CAGR is more viable. AAGR is a linear measure which doesn’t take into account the effects of compounding, can be misleading at times. But CAGR smooths out the impact of market volatility on periodic return.
What is market CAGR? CAGR is a method to calculate how much a sector or a company will grow over a time period. The market CAGR refers to an estimated rate of growth of a sector. Suppose analysts said that the retail market would grow by 8 percent, it means that in the coming each year the industry will grow at an average rate of 8 percent from the previous year.

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