How to Use CAGR Calculator
Enter your investment value at the end.
Enter your investment value at the start.
Enter the number of investment periods (years, months, days)
:`(X / Y )^(1/N)-1`
X: Investment value at the end.
Y: Investment value at the start.
N: Number of investment periods (Months, Days etc.)
How To calculate CAGR
- An investment was made with a starting value of $850
- It Grew to $5,000 in 4 years.
- Therefore our X is $5000, Y = $850 and N is 4
- `(5000/850)^(1/4)-1 = 0.5573`
- Then multiply it by a hundred to get the percentage: 0.5573 * 100 = 55.73%
- The compound annual growth rate is $55.73
- An Investment is made with $10,000
- It's ending value is $23,000 in 6 years
- Y: $23,600, Y:$10,000, N: 6
- `(23600/10000)^(1/6)-1 = 0.1538`
- Again multiply the result by a 100: 0.1538 X 100 = 15.38%
- The compound annual growth rate is 15.38%
Compound annual growth rate otherwise known as (CAGR) is the average growth rate of an investment over a period of time that is longer then one year.
Generally Compound annual growth rate is used to calculate the average growth of an investment of a specific period. This is useful as the growth of an investment year to year can be difficult to calculate, as it may increase one year decrease slightly another year. It can also be used to compare different investments or compare companies average growth rates.
CAGR is a representation of the average growth per year, if it was at a steady and consistent rate. Often this is not the case with investments.
An example is: An investment is made with $15,000 in 2015. In 2016 it grew to $19,000 and then in 2017 it grew to $19,800. The CAGR is 14.89%, where in reality most of the gain was in 2016. The compound annual growth rate is the average gain made over the period.