What is CAGR (compound annual growth rate)?
CAGR(Compound Annual Growth Rate) is a key parameter to calculate or analyze the growth of your investment over a period of time (usually more than 1 year). CAGR tells you how your investment is Grown every year i.e. Average Annual Growth of your investment, provided returns are re-invested every year. CAGR is an important Ratio as it eliminates the short-term hiccups and fluctuations in returns and provides a clear picture of long-term Annual Growth Returns. Use our SIP CAGR Return Calculator to calculate returns of your Mutual Fund SIP. You can also use our calculator to calculate CAGR returns for any Lump sum investment.
Formula to Calculate CAGR
The Formula to Calculate CAGR is (((Current Value / Total Investment)1/years ) – 1 ) X 100. If the Current Value of your Investment = CV, Total Investment = TI, and Years Invested = Y the formula to calculate CAGR is
CAGR% = (((CV / TI)1/Y ) – 1 ) X 100
How to Calculate CAGR with Example
Let’s assume You Invested 50,000 on the 1st of January 2018 in a Mutual Fund. Four years later, the investment has grown to 90,000. What is the CAGR % of this Investment? Here your Current Value(CV) = 90,000, Total Investment(TI) = 50,000, and Years of Investment(Y) = 4. Hence Your CAGR will be
(((90000/50000)1/4 ) – 1 ) X 100 = 15.83 %
How to Use CAGR Calculator?
- Choose Your Mode of Investment, which can be either SIP(Systematic Investment Plan) or Lumpsum. SIP is selected by default. Click on the dropdown to change the mode of investment.
- Next, Choose the Start Date and End Date of your investment. Either enter dates manually or click on the calendar icon to open the calendar and choose dates accordingly.
- If you have chosen SIP as your mode of Investment then enter monthly investment either in the input field or choose from the slider.
- For Lumpsum investment please enter your invested amount.
- Finally enter the current value of your investment including returns and click on calculate to get the CAGR of your returns.
When to use CAGR?
Since CAGR(Compound Annual Growth Return) tells us how investment is Grown Annually it is Best Suited for Lumsum investment which is invested for more than 1 Year. You can also calculate CAGR for SIP(Systematic Investment Plan), however, XIRR(Extended Internal Rate of Return) will be a more accurate indicator of return in case of SIPs.
What should be CAGR to double my investment every 3 year
If your Investment CAGR is 25% which is considered a Very Good CAGR return then your Investment will Double every 3 years.
Is 25% CAGR return Good?
Yes, a 25% CAGR return is considered a very good return and if you are getting 25% CAGR from your Investment, your investment will Double every 3 years.
Get in Touch with Us: Contact Us