CAGR Calculator

Formula

CAGR = [(Final Value / Initial Value)^1/n] - 1

Where:

• Final Value = The value of the investment at the end of the period.
• Initial Value = The value of the investment at the start of the period.
• n = The number of years.

The Compound Annual Growth Rate (CAGR) is a crucial metric used in finance and investing to determine the average annual growth rate of an investment over a specified period of time, longer than one year. It is considered one of the most accurate ways to measure the long-term performance of an investment because it accounts for the effect of compounding. CAGR provides a "smoothed" rate of return, imagining that the investment grew at a steady rate each year. This makes it an excellent tool for comparing the historical performance of different investments, such as mutual funds or stocks. Calculating CAGR with this tool is simple. You need to provide three key pieces of information. First, enter the 'Initial Value' of the investment, which is its starting price or value. Second, enter the 'Final Value' of the investment at the end of the period. Third, provide the 'Number of Years' that the investment was held. After entering these values and clicking 'Calculate CAGR', the tool will compute and display the Compound Annual Growth Rate as a percentage. For example, if an investment grew from $10,000 to $25,000 over 5 years, the CAGR would be 20.11%. This tells you that, on average, the investment grew by 20.11% each year during that period. It's a much more representative figure than a simple average return, especially for volatile investments.