CAGR Calculator – Compound Annual Growth Rate
Calculate the Compound Annual Growth Rate (CAGR) and absolute returns of mutual funds, stocks, or real estate portfolios.
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Understanding Compound Annual Growth Rate (CAGR)
CAGR represents the annualized rate of compound growth of an investment over a specific time horizon. Unlike simple returns, CAGR accounts for compounding, offering a reliable metric to compare different asset classes (like stocks vs mutual funds vs gold).
The formula is: CAGR = (Ending Value / Beginning Value) ^ (1 / Years) - 1. This calculator computes both CAGR and absolute returns instantly.
Frequently Asked Questions (FAQ)
1. When should I use CAGR instead of absolute returns?
Use CAGR for investments held for more than 1 year to account for compounding. Absolute return is suitable for short-term trades under 12 months.
2. Does CAGR represent actual annual market gains?
No, CAGR is a smoothed rate of return. It shows what an investment would have grown at if it grew at a steady, constant rate, ignoring year-to-year volatility.