CAGR Calculator Guide Guide
How to Use
- 1Enter the **Beginning Value** of the investment.
- 2Enter the **Ending Value** of the investment.
- 3Enter the **Number of Years** (Period) the investment was held.
- 4Click calculate to see the **Compound Annual Growth Rate (CAGR)**.
Formula & Logic
CAGR represents the constant rate at which an investment would have grown if it had grown at a steady rate each year. It smoothes out the volatility of periodic returns.
Practical Applications
Portfolio Performance
Compare the performance of your investment portfolio against a benchmark index like the S&P 500 over a specific period.
Business Growth
Analyze the annual growth rate of revenue, users, or market share over several years to assess business health.
Historical Analysis
Evaluate the historical returns of mutual funds or stocks to understand their long-term growth trend.
Frequently Asked Questions
Q.Why use CAGR instead of average return?
Average return can be misleading if investment values fluctuate significantly. CAGR provides a geometric mean that accurately reflects the true return required to grow an initial value to a final value over time.
Q.Can CAGR operate on negative values?
CAGR generally requires positive beginning and ending values. If an investment loses all its value (goes to zero) or starts at zero/negative, the standard CAGR formula cannot be applied.
Q.Is higher CAGR always better?
Generally yes, but a higher CAGR often comes with higher risk (volatility). It's important to consider risk-adjusted returns when comparing investments.