Quickly calculate and comprehend the returns on your mutual fund SIP and lumpsum investments over time with our online calculator!
Initial Investment:
Maturity Value:
Rate of CAGR:
*Investing in the securities market carries risk. Please do your own due diligence before investing.
CAGR, or Compounded Annual Growth Rate, is a vital metric in finance and investment used to evaluate the performance of stocks, mutual funds, and other investments. It represents the annual growth rate of an investment over a specific timeframe, factoring in the effects of compounding.
CAGR offers a smooth average growth rate, making it particularly useful for periods with variable returns. This measure accounts for the compounding effect, meaning that the returns are calculated not just on the initial principal but also on the accumulated interest over time
The formula for calculating the Compounded Annual Growth Rate (CAGR) is:
CAGR = [(Ending Value/Beginning Value)^1/n] - 1
Where:
Example Calculation:
Let's say you invested $10,000 in a stock at the beginning of the year, and by the end of 2 year, its value grew to $12,500. Using the CAGR formula with a two-year period:
CAGR = [(12,500/10,000)^1/2] - 1
In this example, the CAGR is 11.80%, indicating that the investment grew at an average annual rate of 11.80% over the two-year period.
1. Simplicity in Understanding: CAGR is a user-friendly metric that doesn't require advanced financial expertise. Investors, stakeholders, and analysts can easily grasp its significance and implications.
2. Effective for Marketing and Reporting: CAGR finds utility in marketing materials and financial reports, effectively showcasing growth achievements. Using CAGR to represent growth rates can appeal to investors looking for consistent and stable growth opportunities.
3. Comparison Across Different Timeframes: CAGR enables comparisons across various timeframes, making it easier to assess investment performance over different periods and understand long-term growth trends.