Compound Annual Growth Rate (CAGR) Calculator
CAGR represents the mean annual growth rate of an investment over a specified period of time longer than one year, smoothing out intermittent volatility.
Sensitivity Analysis
Evaluate how variations in key operational drivers impact Compound Annual Growth Rate (CAGR %).
| Sensitivity Case | Assumption Shift | Driver Value | Compound Annual Growth Rate (CAGR %) | Impact vs Base |
|---|
Formula & Methodology
CAGR (%) = ((Ending Value / Beginning Value)^(1 / Years) - 1) * 100BVStarting portfolio or investment value.
EVFinal portfolio value at conclusion of period.
nDuration of investment in years.
Practical Worked Example
A portfolio grows from Rs 1,00,000 to Rs 2,50,000 over 5 years.
Interpretation & Industry Benchmarks
CAGR eliminates erratic annual spikes and drops to show the constant compounding rate needed to reach the end goal.
Significantly outpaces typical broad stock market indexes.
Aligns with historical long-term equities.
May barely keep ahead of consumer inflation.
Industry Nuance: CAGR does not account for mid-period cash injections or withdrawals; use XIRR for portfolios with irregular deposits.
Analytical Limitations
- Does not measure investment risk or interim drawdown volatility.
Frequently Asked Questions
What is the difference between CAGR and average annual return?
Average annual return is the arithmetic mean which overstates growth in volatile assets. CAGR is the geometric mean which accounts for compounding and true final wealth.