CAGR, or Compound Annual Growth Rate, defines how much a certain subject will grow each year as a percentage. For example, something with a CAGR of 5% will experience a 5% growth each year. If an industry is valued at $100,000, a 5% CAGR would mean in 12 months it will be worth $105,000.
This calculator calculates the growth of something based on its CAGR, it does not calculate the CAGR based on an initial and ending value. With that cleared up, here is the formula that is used to calculate the end value of something based on its CAGR:
Ending Value = Initial Value * (1 + (CAGR / 100))Periods
If you wanted to calculate the CAGR based on a starting and ending balance, you can use this formula:
CAGR = (Ending Value / Beginning Value)(1 / No. of Periods) – 1
CAGR is often referred to as one of the best ways to accurately determine the return or growth of an investment, balance, industry, or anything that can rise or fall over time.
Our CAGR tool is very easy and simple to use, the steps include:
Let's say you want to see how much your $100,000 investment portfolio would be valued at in 5 years based on a CAGR of 7.5%. Your formula would look like this: Ending Value = 100,000 * (1 + (7.5 / 100))5. At the end of 5 years your portfolio would be valued at about $143,562.93.
A 10% CAGR means you will get or see a 10% gain or raise in value on something every year.
A CAGR of 30% can be very good depending on the specific subject. If you are talking about an industry, that is basically an unachievable number. If you are talking about an investment account that is also rather unreachable. If you are talking about a small company, that is in line to be a good percent typically.
Yes, CAGR and annualized return are essentially the same thing, each explain and show their results differently though.
Yes, CAGR can indeed be negative. If it is, that means it is losing value which is generally not a good thing.
Create Date: August 26, 2024
Last Modified Date: August 28, 2024
