Very simple calculator by IPO Central. Just enter the values and get the result.
What is Compound Annual Growth Rate (CAGR)?
CAGR is a measure of your investments’ average annual growth over a given timeframe. It displays the average rate of return on your investments over the course of a year.
CAGR is a useful tool for investors because it measures investment growth (or decline) over time. Profits are assumed to be reinvested at the end of each year of the time horizon when calculating CAGR. As a result, CAGR is a representative number rather than an accurate return. Most investments do not grow at the same rate year after year. Regardless, the CAGR calculator is widely used to compare different investments.
How is CAGR different from absolute returns?
CAGR is fundamentally different from absolute returns as the former tells us about returns in a year while the latter doesn’t take timeframe factor into consideration.
Let’s understand this with an example. If someone invested INR 1,00,000 in 2020 and the amount increased to INR 1,50,000 in 2023, the portfolio’s absolute returns stand at 50% (over 3 years) but its CAGR is only 14.47% (every year).
How is CAGR calculated?
CAGR is calculated using a simple formula
CAGR = (FV / PV) 1 / n – 1
Here, FV stands for Future Value or Ending Value of the investment, PV stands for Present Value or Starting Value while n stands for the timeframe of the investment in number of years.
Where is CAGR used?
CAGR is widely used in personal and corporate finance to compare returns or performances of two or more investments and companies over different time periods. Similarly, CAGR is used extensively in IPO research to check and evaluate a company’s performance on different parameters.
Is the online CAGR calculator free to use?
Yes! IPO Central’s online CAGR calculator is absolutely free to use and there are no restrictions or limitations on the tool’s usage. Unlike some other tools, our CAGR calculator online tool also works in cases where the investment diminishes in value.