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CAGR Calculator

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Years
CAGR (in percentage %)
18.56

What is CAGR?

Compound Annual Growth Rate or CAGR refers to the annual growth of an investment over a specific duration. The value of the investment is assumed to be compounded over the period. Unlike the absolute return, CAGR takes the time value of money into the account. As a result, it can reflect the actual returns of an investment generated over a year.

CAGR shows you how an investment grows in value over a period. In simple words, it shows you how much your investment has earned each year for a given time interval.

What is a CAGR Calculator?

The Compound Annual Growth rate (CAGR) calculator is a utility tool to calculate the compound annual growth rate of your investment over some time. You will have to enter the value of the initial investment, the expected final value of the investment and the number of years to calculate the CAGR.

The CAGR calculator has a formula box where you select the beginning and the ending value of the investment. You must also select the number of years of the investment. The CAGR calculator will show you the annual rate of growth of your investment. You can use CAGR to compare the return on investment against a benchmark.


How Does a CAGR Calculator Work?

The CAGR can be calculated using the following mathematical formula:

CAGR = [(Ending Value/Beginning Value) ^ (1/N)]-1

CAGRCompound Annual Growth Rate
Beginning Value of the Investment 
Number of Years of Investment 
NNumber of Years of Investment

The above formula depends on three variables, namely, the beginning value, the ending value, and the number of years (N).

When you enter the three variables, the CAGR calculator will give you the rate of return on the investment.

For example, the initial value of your investment is Rs 15,000, and the final value is Rs 25,000 in three years (N= 3 years).

CAGR is calculated as: CAGR = (25,000/15,000)^(⅓) – 1

CAGR = 18.56%.

You can also calculate the absolute return of the investment using the CAGR calculator:

End Value – Beginning Value/Beginning Value * 100

For the same example you have:

(25000 – 15000)/15000 * 100 = 66.66%

How to Use the ClearTax CAGR Calculator?

The ClearTax CAGR calculator is a simulation that helps you to calculate the compound annual growth rate of your investment. It allows you to decide if the investment yields a significant return over time.

  • You must fill in the initial value of the investment.
  • You then fill the final value of the investment and the number of years of the investment.
  • The CAGR calculator shows you the Compound Annual Growth Rate.

You can also use the CAGR calculator to calculate the absolute return on the investment.

  • You enter the beginning and the ending value of the investment.
  • The CAGR calculator shows you the absolute rate of return on the investment.

Advantages of Using the ClearTax CAGR Calculator

You can use the ClearTax CAGR Calculator to make the right investment decisions. It helps you to determine the annual rate of return of your investments. You may compare the returns from the investment against a relevant benchmark and analyse your investment decisions.

  • The ClearTax CAGR Calculator is a simple, easy to use utility tool. All you must do is to enter the initial and final values along with the period of the investment. The calculator will show you the compound annual growth rate.
  • The CAGR calculator helps you to calculate the returns from your mutual fund investments. You can compare the mutual fund’s average annual growth rate overtime against a benchmark. It allows you to choose the mutual fund based on past returns.
  • You can also compare the performance of stocks against the peers or the industry as a whole using the compound annual growth rate.
  • You may use the CAGR to determine how the investments in your portfolio have performed over some time.

Limitations of CAGR

Even though CAGR is a useful concept, it has some limitations. The following are some of the weaknesses of CAGR calculators:

  • In calculations related to CAGR, only the beginning and ending values are taken into account. It assumes that growth is constant over the duration of time and does not consider the aspect of volatility.
  • It is suitable only for a lump-sum investment. In the case of SIP investments, the systematic investment at various time intervals is not considered as only the beginning value is taken into account for the calculation of CAGR.
  • CAGR does not account for the inherent risk of an investment. When it comes to equity investment, risk-adjusted returns are more important than CAGR. You must use Sharpe’s Ratio and Treynor’s Ratio to determine the risk-return reward of the investment.

Frequently Asked Questions

What is CAGR and how is it calculated?
CAGR Formula:
What is CAGR return in mutual funds?
What is CAGR return in stocks?
What is CAGR in banking?
What is the difference between XIRR and CAGR?
What is CAGR in economics?
How to calculate the CAGR of a Company?
What is the difference between absolute return and CAGR in a mutual fund?
What is a good CAGR for an industry?
What is the difference between CAGR and annualised return?
What is the CAGR Ratio?
What is the difference between CAGR and rolling returns?
How to calculate CAGR? How to calculate CAGR with a Calculator? How to interpret CAGR?
How to calculate CAGR when one number is negative?
How to calculate CAGR in excel?
How to calculate CAGR of a Company?
How to calculate CAGR Online?
What is CAGR in SIP? How to calculate CAGR for SIP in Excel?
When to use CAGR?
Why is CAGR used?
How to convert absolute return to CAGR?
Which is better IRR or CAGR?
Why does the ClearTax CAGR Calculator show both the absolute return and the CAGR?
Can you use the ClearTax CAGR Calculator to calculate the return from mutual funds?
Does the ClearTax CAGR Calculator also show the IRR?
Can you use the ClearTax CAGR Calculator to determine the value of SIP investments?
Why should you use the ClearTax CAGR Calculator to calculate the return on your investment?

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