Calculate compound annual growth rate for investments with ease
The Compound Annual Growth Rate (CAGR) is a useful measure of the rate of return of an investment over a certain period of time. It represents the idea that an investment generates returns on its returns, leading to exponential growth. CAGR is widely used to evaluate the performance of investments, including stocks, mutual funds, and business growth.
CAGR is calculated using the formula: CAGR = (End Value / Beginning Value)^(1 / Number of Years) - 1. This formula provides a smoothed rate of return that helps investors understand how their investment has performed over time, making it easier to compare different investment opportunities.
For example, if you invested $1,000 in a mutual fund and after 5 years it grew to $1,500, the CAGR would give you the average annual rate of return on your investment. This metric is crucial for long-term investment planning and evaluation.
| Year | Investment Value |
|---|---|
| 0 | $1,000 |
| 5 | $1,500 |