Measure the annual growth rate of your investments over time, taking into account the compounding effect.
Compound Annual Growth Rate (CAGR):
0.00%
This is the year-over-year growth rate of your investment over the specified time period.
Compound Annual Growth Rate (CAGR) is a measurement of the annual growth rate of an investment over a specified time period longer than one year. It represents the steady rate at which an investment would have grown if it grew at the same rate each year.
Unlike simple annual growth rates, CAGR takes into account the effect of compounding, making it a more accurate representation of an investment's performance over time.
CAGR = (Final Value / Initial Value)^(1/n) - 1
Where n is the number of years
For example, if you invested $10,000 and it grew to $15,000 over 5 years, the CAGR would be:
CAGR = ($15,000 / $10,000)^(1/5) - 1 = 8.45%
This means your investment grew at an average rate of 8.45% per year over the 5-year period.
CAGR is most useful when:
While simple annual return calculates the average of yearly returns, CAGR provides the geometric mean of annual returns, accounting for compounding effects.
An investment grows from $10,000 to $13,000 in year 1 (30% growth), then falls to $11,000 in year 2 (15.4% decline).
CAGR gives a more accurate picture of the actual growth rate experienced.
Get precise CAGR calculations instantly without complex manual calculations or spreadsheets.
See a visual representation of your investment's growth over time with our interactive chart.
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A "good" CAGR depends on the investment type, risk level, and market conditions. Generally, a CAGR of 7-10% is considered good for long-term stock investments. Government bonds might have 2-5% CAGR, while high-growth investments might exceed 15%. Compare your CAGR to relevant benchmarks for your investment type.
Yes, CAGR can be negative if the final value of your investment is less than the initial value. A negative CAGR indicates that your investment has decreased in value over the period.
CAGR measures the growth rate of a single investment over time, while IRR calculates the rate at which the net present value of all cash flows equals zero. IRR accounts for multiple cash flows, making it suitable for complex investments with multiple inflows and outflows.
While CAGR can be calculated for any time period, it's most useful for investments with a duration of 3 years or longer. For shorter periods, simple annual return might be more appropriate as CAGR smooths out volatility, which could be important to understand in short-term investments.
No, the basic CAGR formula assumes a single initial investment and a final value without any additional contributions or withdrawals. For investments with multiple cash flows, other metrics like Money-Weighted Rate of Return (MWRR) or Internal Rate of Return (IRR) are more appropriate.
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