{"id":6321,"date":"2022-02-24T20:35:35","date_gmt":"2022-02-24T15:05:35","guid":{"rendered":"https:\/\/aayushbhaskar.com\/?p=6321"},"modified":"2022-02-24T20:35:35","modified_gmt":"2022-02-24T15:05:35","slug":"cagr","status":"publish","type":"post","link":"https:\/\/aayushbhaskar.com\/cagr\/","title":{"rendered":"What is CAGR, How to Calculate & How it Differs from XIRR","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"

Have you ever wondered how to calculate the returns from your investments?<\/span><\/p>\n

If so, this article is great news for you. You\u2019re going to learn a technique called CAGR. <\/span><\/p>\n

This post will teach you everything you need to know about CAGR and how to use it in your financial calculations.\u00a0<\/span><\/p>\n

Here\u2019s a quick rundown of what we\u2019ll cover next:<\/span><\/p>\n

What is CAGR?<\/span><\/h2>\n

CAGR stands for \u201cCompound Annual Growth Rate\u201d and it can be calculated for almost anything that can go up or down in value over time. <\/span><\/p>\n

CAGR can be used to describe multiple fields of study. However, it is primarily used in finance, economics, and demography.<\/span><\/p>\n

The compound annual growth rate (CAGR) of an\u00a0<\/span>investment<\/span><\/strong>\u00a0is the mean annual growth rate of an investment over a specified period longer than one year.<\/span><\/p>\n

In simple words, it shows you how much your investment has been earned each year for a given time interval. <\/span><\/p>\n

A positive CAGR means that your investments increased, while a negative CAGR means your investments decreased.<\/span><\/p>\n

How to calculate CAGR?<\/span><\/h2>\n

You can calculate CAGR by using the following three parameters:<\/span><\/p>\n

    \n
  1. Beginning Value of Investment<\/span><\/li>\n
  2. End Value of Investment<\/span><\/li>\n
  3. Period of Investment (Years)<\/span><\/li>\n<\/ol>\n

    The mathematical formula for measuring CAGR is:<\/span><\/p>\n

    \"\"<\/p>\n

    For example, if the beginning value is Rs 1,000, and the end value is Rs 2,500 with an investment period of 5 years, the CAGR is calculated as follows:<\/span><\/p>\n

    CAGR = (2,500\/1,000)^(1\/5)-1 = 20.11%<\/span><\/p>\n

    Wait!<\/p>\n

    Don’t worry, you don’t have to calculate manually. I am here to make your life easy.<\/p>\n

    We have our very own online CAGR Calculator<\/a>. <\/strong><\/p>\n

    Just enter Values and you will get the CAGR in microseconds.<\/p>\n

    Pros and Cons of CAGR<\/span><\/h2>\n

    CAGR is one of the most reliable metrics to estimate the growth of your investment because it calculates compound interest. Unlike the absolute rate of returns, CAGR provides a more precise estimation.<\/span><\/p>\n

    Let us have a look at the pros and cons of CAGR:\u00a0<\/span><\/p>\n

    Pros of CAGR:<\/span><\/h3>\n