CAGR Calculator

CAGR or Compound Annual Growth Rate gives you the investments annual growth rate over some period of time. You may consider CAGR as a percentage-based metric, which helps you determine the annual rate at which your investment grows over a period of more than one year. You may use CAGR to determine the exact percentage of the returns from your investments each year, across the investment tenure.

CAGR = [(Ending Value/Beginning Value) ^ (1/N)]-1
For example, the initial value of your investment is Rs 10,000, and the final value is Rs 15,000 in three years (N= 3 years). CAGR is calculated as:
CAGR = (15,000/10,000)^(⅓) – 1
CAGR = 14.47%.

You may measure the performance of mutual funds using CAGR. You get to know the average annual growth of a mutual fund or even the decline, over a specific time period.
For example, you invested Rs one lakh in XYZ mutual fund in 2015. The NAV of XYZ mutual fund was Rs 20 and you got 5,000 units. You have redeemed all these units at the end of three years at a NAV of 25. Your mutual fund investment has a value of 5000 * 25 = Rs 1,25,000.
CAGR of mutual funds = (1,25,000/1,00,000) ^ (⅓) – 1 = 7.72%.

You may use the Compound Annual Growth Rate or CAGR to determine the performance of your stock investments over a set period of time. You get an idea on how much your stocks have gained or lost each year.
For example, you have bought 200 shares of XYZ at Rs 100 in the year 2016. You have sold all the 200 shares in the year 2018 at Rs 150.
CAGR of stocks = (30,000/20,000) ^ (½) – 1 = 22.47%.

CAGR or Compound Annual Growth Rate shows the actual return from an investment. However, CAGR is popularly used to gauge return from mutual funds and stocks and not so much for banking. You may consider annualised yield in banking instead of CAGR. It is the interest you receive in a year over the total investment you make.

​​CAGR is used to calculate the annualised return on a one-time (lump sum) investment, while XIRR is used for investments with multiple cash flows, such as SIPs. XIRR considers the timing of each investment, making it a more accurate measure for staggered investments.

CAGR shows you the mean annual growth rate of your investments over a period of time which is above one year. It is an accurate way to determine return on individual assets and investment portfolios, which may rise and fall over some time.

Absolute return measures the total gain or loss on an investment over a specific period without considering the time taken. CAGR (Compound Annual Growth Rate) calculates the average annualised return by factoring in the investment duration and the effect of compounding, making it more suitable for evaluating long-term performance.

You may consider CAGR of around 5%-10% in sales revenue to be good for a company. CAGR is used to forecast the growth potential of a company. For a Company with a track record of over five years, you may consider a CAGR of 10%-20% to be good for sales.

You may consider an annualised return to be standardised return computed as a percentage per annum.
Annualised Return = (End Value – Beginning Value) / (Beginning Value) * 100 * (1/holding period of the investment)
Annualised return is an extrapolated return for the entire year. CAGR shows the average yearly growth of your investments.

The CAGR (Compound Annual Growth Rate) ratio measures the average annual growth rate of an investment over a specific period, assuming the returns are compounded each year. It helps investors compare the long-term performance of different investments, with a higher CAGR generally indicating better growth, all else being equal.

Rolling returns give you the performance of investments across all time scales. It is the average annualised return for a time period. It measures returns from investments at different points in time eliminating the bias you may see from returns observed at a particular point in time. However, CAGR hides volatility by smoothening the performance of the investment.

Yes, you may calculate CAGR even if one number is negative. You may consider the following example to get a better understanding. Take a look at the table below which shows the Year and the Revenue of Company XYZ.

CAGR = (Ending Investment Value) / (Beginning Investment Value) ^ (1/n) -1
CAGR = (22,00,000)/(10,00,000)^(⅕) -1
CAGR = 17.08%.

You may calculate CAGR using the XIRR function in Excel. You could understand this with an example.
Suppose you invested in a mutual fund on 21 July 2012 at an NAV of Rs 10.26. You want to know the return on 02 January 2015 when the NAV was Rs 39.71. Here’s how to calculate CAGR using the XIRR function in Excel.
 

You may choose the values and dates in the XIRR function.

You may collect data on the sales revenue of a company from the balance sheet. You may consider the following example where you have the sales revenue of a company XYZ taken from the balance sheet.

CAGR = (Ending Investment Value) / (Beginning Investment Value) ^ (1/n) -1
Ending Value = 150
Beginning Value = 100
Number of Years = 5

CAGR = 8.44%

You may consider calculating the CAGR of your SIP investments in mutual funds.
You may find XIRR accounting for multiple investments in the same SIP across a particular tenure. It treats multiple SIPs as the same investment.
Let us understand CAGR in SIP with an example. Suppose you start an SIP in a mutual fund scheme at Rs 500 for 12 months. You have received Rs 6,500 at maturity.
You may consider CAGR to be 15.67%.

You may use CAGR to gauge the performance of different mutual funds to determine the earning potential. CAGR may consider the investment tenure giving you an accurate picture of the earnings from your mutual funds.
You may use CAGR to compare the historical returns of bonds, stocks or mutual funds. It helps you gauge the returns from your investments over the entire investment tenure.

CAGR eliminates the effects of volatility on periodic investments. You may use CAGR to determine the performance of an investment over a time period of around three to five years. CAGR shows the geometric mean return while also accounting for compound growth. CAGR helps you calculate the internal rate of return of your investments.

To convert absolute return to CAGR, you must also know the investment period. Use the formula: CAGR = [(Ending Value ÷ Beginning Value)^(1/n) − 1] × 100, where n is the number of years.

You may consider IRR and CAGR for different purposes. CAGR shows you the return from your investment over a time period. However, you could use IRR to determine the return from complicated projects and investments with different cash inflows and outflows.
IRR and CAGR are the same when you make a lump sum investment. However, they would differ when you make multiple investments and you have variable annual returns. In a nutshell, you may use IRR to determine the return from your investments with multiple cash flows.

The absolute return shows how much the investment has grown over the entire period. However, absolute return does not show you the true growth of the investment. You must calculate the CAGR, which shows the annual growth rate of the investment over a while.

One can use the CAGR Calculator to check the annual growth rate of your mutual fund investments. You can compare the performance of the mutual funds with its peers or even a benchmark. You get an idea of whether you must invest in the mutual fund to get the return you desire.

No, the CAGR Calculator does not show you the IRR on the investment. Both the CAGR and the IRR show you the return on investment. However, CAGR has only an initial investment and a final investment or cash flow. IRR has multiple investments over some time.

If your investment stretches over some time with irregular instalments, it gets difficult to determine the compound annual growth rate or CAGR. It is better to use the SIP calculator to calculate the value of the SIP investments.

Well, you get a birds-eye view on the return from your investment. You may compare two different investments that are held over different periods. You must use the CAGR calculator for investments with a time-frame of over one year.