PocketCompound Annual Growth Rate (CAGR) Calculator
Find the annualized growth rate of your investments. Input your initial investment value, ending value, and time period to find the CAGR.
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CAGR (Annualized Return)
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Absolute Growth
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Absolute Growth Rate
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Compounding Growth Progression
CAGR Formula Explained
CAGR (Compound Annual Growth Rate) is computed as follows:
CAGR = (Ending Value / Beginning Value)(1 / t) - 1
Where t is the total duration of the investment in years.
Worked Example
If you invest ₹1,00,000, and its value grows to ₹2,50,000 over a period of 5 years:
- Initial Value (PV) = ₹1,00,000
- Final Value (FV) = ₹2,50,000
- Duration = 5 years
- CAGR Rate: 20.11%
- Absolute Profit: ₹1,50,000
- Absolute Return Rate: 150.00%
Frequently Asked Questions
What does CAGR represent?
CAGR stands for Compound Annual Growth Rate. It represents the mean annual growth rate of an investment over a specified period of time longer than one year, assuming it compounded steadily.
Why is CAGR better than simple returns?
Simple returns only measure absolute profit from start to end, ignoring the time value. CAGR accounts for the time duration and annual compounding, allowing you to compare assets held for different tenures.
Does CAGR represent year-on-year volatility?
No. CAGR is a representative annualized figure. It assumes the asset grew at a smooth, constant rate, smoothing out the actual year-on-year market volatility and price fluctuations.
How is CAGR different from XIRR?
CAGR is used for a single point-to-point investment with one entry and one exit. XIRR (Extended Internal Rate of Return) is used for cash flows with multiple recurring deposits or withdrawals (like a monthly SIP).
Can CAGR be negative?
Yes, if the final value of the investment is lower than the initial value, the computed CAGR will be negative, indicating annualized wealth decay.