CAGR Definition Compound Annual Growth Rate, or CAGR, is a tool to show “smoothed out” returns on a given investment over time. You can use this free online CAGR calculator to determine the percentage returned on a specific investment or an entire portfolio. Some growth investments, such as stocks which are expected to increase in value, will not grow at the same rate year after year. You may invest in a stock and for each of 5 years see different growth rates — for example, the market value of your stock may go up by 5 or 10 percent in some years but only 1 or 2 percent, or even lose value, in others — but the CAGR for that investment will show what you effectively earned in growth per year over that time.
How to Use the Calculator Our Compound Annual Growth Rate calculator takes three inputs:
Ending Value or Present Value
Number of Periods (years)
After inputting these three numbers, simply click the Calculate! button to find the CAGR for your investment.
Example For an example, let’s say you’ve held a stock for the last 10 years, and you want to see what effective growth rate you’ve earned on your investment over that time. You initially invested $10,000 into the stock and its market value is now $23,000.
Enter the present value of the investment in the first field, in this case 23000.
Enter the initial amount of investment in the second field, in this case 10000.
Enter the number of years, 10, into the third field.
Find the CAGR at the bottom of the calculator. In this case it is 8.69%.
Here are some things to keep in mind when using the CAGR calculator:
Only input digits into the calculator. Do not use any symbols, such as dollar signs, commas or periods.
The most common use for a CAGR calculator is to find the CAGR for an active investment which you already own, as in our example above.
You may also want to use the CAGR to find the required return rate over time to reach a specific goal. For example, if you are 40 years old and have $50,000 to invest, and decide you want to turn that into $500,000 by the time you retire at age 65, Enter 500000 into the first field, 50000 into the second field, and 25 into the third field ( 65-40=25 years) to find you would need an investment with an average annual growth rate of 9.65% to reach your goal.
Remember that a CAGR calculator is only useful to find principal growth of an investment, and does not take into account other types of return on investment, such a dividend payments from a stock, or interest payments on a bond. These numbers are very important for investments that pay them, but are not factored into a CAGR calculation unless they are reinvested in the principal of the investment.
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How to Calculate CAGR Let's be honest - sometimes the best cagr calculator is the one that is easy to use and doesn't require us to even know what the cagr formula is in the first place! But if you want to know the exact formula for calculating cagr then please check out the "Formula" box above.