CAGR (%)
0%
Initial Value Amount
₹10,000
Final Value
₹25,000
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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 at an exponential
rate. 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 compound interest 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.
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dapibus massa iaculis.
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.
Using CAGR calculator you can
- Determine whether your investments are growing with time
- Helps you evaluate which investment options are performing better compared to others.
How does CAGR Calculator Work?
Our calculator takes three main factors into account
- Present Value of investments(PV)
- Future Value of the investment(FV)
- Number of years(n)
By inputting these values, the calculator is able to determine the CAGR for the investments for that specific
period of time using this formula
CAGR =[FV/PV)]1/n – 1
So according to the formula, If you you put 10000 for 5 years and the the final amount after 5 years is 15000,
then
PV = ₹10000
n = 5 years
FV = ₹15000
CAGR = [FV/PV)]1/n – 1
= [15000/10000]1/5 -1
= 0.845
So the CAGR on your investment after 5 years would be 0.845 or 8.45 %
Similar Calculators
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.
