What is CAGR?
CAGR stands for Compound Annual Growth Rate. It represents the constant annualized growth rate required for an investment to grow from its starting value to its ending value over a set number of years.
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CAGR Calculator - Compound Annual Growth Rate | 1ClickTools
Calculate Compound Annual Growth Rate (CAGR) for stocks, mutual funds, revenue, and business investments. Instant formula and annual growth schedules.
About This Tool
Evaluating investment returns based solely on raw percentage gains can be misleading due to year-over-year market fluctuations. A stock that gains 50% in Year 1 and drops 30% in Year 2 does not average a 10% annual return. Compound Annual Growth Rate (CAGR) solves this problem by calculating the single annualized growth rate required for an investment to grow from its initial starting balance to its final ending balance over a specified number of years. The standard formula for CAGR is CAGR = (End Value / Start Value)^(1 / Years) - 1. CAGR is widely used by equity investors, venture capitalists, and business analysts to evaluate stock portfolios, corporate revenue growth, fund manager performance, and asset appreciation.
Frequently Asked Questions
What is the formula for CAGR?
The formula is CAGR = (Ending Value / Starting Value)^(1 / Number of Years) - 1.
Why is CAGR better than simple average return?
Simple average return ignores compounding and volatility. CAGR calculates true geometric growth, giving an accurate representation of portfolio performance over time.
Can CAGR be negative?
Yes. If your final investment value is lower than your initial starting value, CAGR will be a negative percentage.
What is a good CAGR for stock market investments?
Historically, broad market equity indices (such as the Nifty 50 or S&P 500) have delivered an average CAGR of roughly 10% to 12% over multi-decade periods.
Does CAGR account for interim deposits or withdrawals?
No. Standard CAGR assumes a single initial investment with no additions or withdrawals. For ongoing cash flows, Internal Rate of Return (IRR) is used.
How do I calculate CAGR for less than 1 year?
Convert months into fractional years (e.g. 6 months = 0.5 years) and plug 0.5 into the time exponent.
Where is CAGR used in corporate finance?
CAGR is used to measure revenue growth, user growth, earnings per share (EPS) growth, and asset portfolio performance.
Is this CAGR calculator free?
Yes, 1ClickTools CAGR Calculator is 100% free without signups or usage limits.
Is my financial input private?
Yes. All calculations process locally in your browser with zero server tracking.