Calculate My Cagr

CAGR Formula:

\[ CAGR = \left(\frac{End\ Value}{Start\ Value}\right)^{\frac{1}{Years}} - 1 \]

Compound Annual Growth Rate (CAGR):

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1. What is CAGR?

The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified time period longer than one year. It represents one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time.

2. How Does the Calculator Work?

The calculator uses the CAGR formula:

\[ CAGR = \left(\frac{End\ Value}{Start\ Value}\right)^{\frac{1}{Years}} - 1 \]

Where:

\( End\ Value \) — The ending value of the investment
\( Start\ Value \) — The beginning value of the investment
\( Years \) — The number of years the investment was held

Explanation: The formula calculates the smoothed annualized gain of an investment over a period of time, assuming the investment grows at a steady rate each year.

3. Importance of CAGR Calculation

Details: CAGR is useful when comparing investments of different types or when evaluating business performance over multiple years. It eliminates the effects of volatility and provides a clearer picture of long-term performance.

4. Using the Calculator

Tips: Enter the starting value, ending value, and number of years. All values must be positive numbers (values > 0, years > 0).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between CAGR and average annual return?
A: CAGR accounts for compounding, while average return simply divides the total return by the number of years, ignoring compounding effects.

Q2: What are typical CAGR values for investments?
A: Stock market returns average about 7-10% CAGR long-term. Higher-risk investments may have higher CAGRs but with more volatility.

Q3: Can CAGR be negative?
A: Yes, if the ending value is less than the starting value, the CAGR will be negative, indicating a loss.

Q4: What are limitations of CAGR?
A: CAGR doesn't account for investment risk or volatility. It assumes smooth growth, which rarely happens in reality.

Q5: How is CAGR different from annualized return?
A: They're essentially the same concept, though CAGR typically refers to multi-year periods while annualized return can refer to any period converted to an annual rate.