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CAGR Calculator

Yr
CAGR is 37.97%

The Compound Annual Growth Rate (CAGR) is an important financial ratio that represents the average annual growth rate of an investment over a specific period. It helps investors understand the performance of their investments and make informed financial decisions by comparing the growth rates of various investments, such as stocks, mutual funds, and fixed deposits. INDmoney’s free CAGR calculator simplifies this process, providing you with accurate results and valuable insights.

How to use CAGR Calculator by INDmoney

Follow these simple steps to calculate your investment's CAGR using our free tool:

  1. Enter the initial value of your investment in the "Initial Investment" field.
  2. Input the final value of your investment in the "Final Investment" field.
  3. Specify the number of years for which the investment was held in the "Duration of Investment" field.

The CAGR will be calculated for your investment.

Understanding Compound Annual Growth Rate (CAGR)

What is CAGR?

CAGR, or Compound Annual Growth Rate, is a financial metric that represents the average annual growth rate of an investment over a specific period. Unlike other growth metrics, CAGR takes compounding into account, giving a more accurate representation of an investment's performance.

CAGR Formula and Calculation

The CAGR formula is:

CAGR = (Final Value / Initial Value) ^ (1 / Number of Years) - 1

This formula helps calculate the average annual growth rate, assuming that the investment grows at a constant rate each year.

Applications and Importance of CAGR in Investments

CAGR is essential for various reasons:

  • It allows investors to compare investments with different time horizons and volatility.
  • It helps evaluate the performance of individual investments or entire portfolios.
  • It simplifies complex investment returns into an easily understood annual growth rate.

Limitations and Caveats When Using CAGR

While CAGR is a valuable metric, it has some limitations:

  • It assumes constant growth, which may not accurately reflect real-world investments with fluctuating returns.
  • It does not account for factors such as dividend reinvestment, taxes, or fees.
  • It may not accurately represent investments with negative growth rates.

Comparing CAGR with Other Financial Metrics

CAGR is just one of many financial metrics that investors can use to evaluate investments. Other metrics, such as the Internal Rate of Return (IRR), Annualized Total Return, and Average Annual Return, provide different perspectives on an investment's performance. It is essential to consider multiple metrics when making investment decisions.

CAGR Calculator Examples

Example 1: Indian Stock Investment

Initial Value: ₹1,00,000

Final Value: ₹2,00,000

Investment Period: 5 years

CAGR = (2,00,000 / 1,00,000) ^ (1 / 5) - 1

CAGR = 1.1487 - 1

CAGR ≈ 0.1487 or 14.87%

In this example, the Indian stock investment's CAGR is 14.87%.

Benefits of CAGR Calculator:

Here are just a few of the benefits of using our CAGR calculator:

  • Accuracy: Our CAGR calculator ensures accurate results, eliminating the potential for human error in manual calculations.
  • Time-saving: With our CAGR calculator, you can quickly calculate the compound annual growth rate of your investment or business, saving you time and increasing efficiency.
  • Informed decision-making: Understanding the growth rate of your investment or business is essential for making informed decisions about future investments or business strategies. Our CAGR calculator provides valuable insight into this growth rate, helping you make decisions with confidence.

 

Frequently Asked Questions

  • What is CAGR, and why is it important?

  • How do I calculate CAGR?

  • Why use a CAGR calculator instead of manually calculating?

  • Can CAGR be negative?

  • How can I use CAGR to make investment decisions?

  • Is CAGR the same as average annual return?

  • Can I use a CAGR calculator for my business?

  • Are there any limitations to using CAGR?