Compounded Annual Growth Rate (CAGR) calculator allows you to ascertain the rate of growth in an investment over a period of time.
CAGR (%)
0%
Initial Value Amount
₹10,000
Final Value
₹25,000
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 (compound annual growth rate) would consider the growth experienced per year, instead of different number of years.
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:
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 %.
In order to use the Angel One CAGR calculator online, you simply have to enter the following values into the calculator:
After inputting these values, the compound annual growth rate 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:
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:
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.
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.
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.
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.
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.
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.
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.
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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