Disclaimer: Whilst every effort has been made in building this tool, we are not to be held liable for any damages or monetary losses arising out of or in connection with the use of it. Full disclaimer. This tool is here purely as a service to you, please use it at your own risk.
What is CAGR?
CAGR stands for compound annual growth rate and is a representational measure of growth of an investment. To put it in simple terms, CAGR represents the growth interest rate that gets you from the present value to the future value in the specified time period, taking into account for compounding.
CAGR can sometimes be referred to as the annualized rate of return, effective annual rate or annual percent yield. CAGR is a useful measure because the value of investments can fluctuate wildly between periods. You can learn more about this in our article what is CAGR?
As well as looking at current or past investments, you can also use the CAGR calculator to find the growth rate you might need in the coming months or years to reach the investment goals you're setting today. As an example, if you have $5,000 today and you want to reach $15,000 in 10 years time, you will need to find an investment that gives you a compound annual growth rate (CAGR) of 11.61%.
CAGR and IRR
CAGR and IRR are both measues of return on an investment over a period of time. IRR is said to be a more flexible way of calculating investment performance, as it allows for multiple cash flows.
How to calculate CAGR
To calculate the rate of return of an investment you have made, you need to use the CAGR formula and do the following:
- Take the investment value at the end of the period and divide it by its starting value
- Raise the resulting figure to the power of 1 divided by the number of years the investment was for
- Subtract 1 from the result
Formula for CAGR
(FV / PV) 1/n - 1
The CAGR calculator uses the following formula:
CAGR = (FV / PV) 1 / n - 1
FV = the future value of the investment
PV = the present value of the investment
n = the number of years
If you have any problems using this calculator, please contact me.