CAGR Calculator (Compound Annual Growth Rate)
Calculate the compound annual growth rate (CAGR) of an investment over a specified period of time. The CAGR measures the mean annual growth rate of an investment over a specified time period longer than one year.
How to Use the CAGR Calculator
1. Enter the initial value of your investment in the "Beginning Value" field.
2. Enter the final value of your investment in the "Ending Value" field.
3. Enter the number of years the investment has been held in the "Number of Periods" field.
4. Click "Calculate CAGR" to see your compound annual growth rate.
Compound Annual Growth Rate
| Beginning Value | $10,000.00 |
|---|---|
| Ending Value | $25,000.00 |
| Number of Years | 5 |
| Total Growth | 150.00% |
| Annualized Growth Rate | 20.11% |
About CAGR Calculator
The Compound Annual Growth Rate (CAGR) is a useful measure of growth over multiple time periods. It represents the mean annual growth rate of an investment over a specified time period longer than one year.
What is CAGR?
CAGR is the year-over-year growth rate of an investment over a specified period of time. It is calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period being considered.
How to Calculate CAGR
The formula for calculating CAGR is:
CAGR = (Ending Value / Beginning Value)(1 / Number of Periods) - 1
Why CAGR Matters
CAGR gives you a smoothed annual rate of return that eliminates the volatility of periodic returns. It's particularly useful when comparing the historical returns of different investments or when projecting future values based on a constant growth rate.
Limitations of CAGR
While CAGR is a useful metric, it has some limitations:
- CAGR doesn't reflect investment risk or price volatility
- It assumes a smooth growth path over the entire period
- It doesn't account for additional investments or withdrawals
- It may oversimplify complex investment histories