CAGR & Reverse CAGR Calculator

Calculate an investment's growth rate or project its future value.

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About the CAGR Calculator

The Compound Annual Growth Rate (CAGR) is a crucial metric used to determine the average annual growth rate of an investment over a specified period longer than one year. It provides a smoothed-out rate that represents what the investment would have grown at if it had grown at the same rate every year. This calculator allows you to compute both the CAGR and perform a "Reverse CAGR" to project an investment's future value.

How is CAGR Calculated?

CAGR measures the mean annual growth rate of an investment assuming it has been compounding over time. The formula is:

CAGR =  [ (Final Value / Initial Value)1/n - 1 ] × 100
  • Final Value: The value of the investment at the end of the period.
  • Initial Value: The value of the investment at the beginning of the period.
  • n: The number of years.

What is Reverse CAGR?

Reverse CAGR, also known as future value projection, does the opposite of a CAGR calculation. Instead of finding the rate of return, it uses a known initial value and an expected CAGR to project the investment's final value after a certain number of years. The formula is:

Final Value =  Initial Value × (1 + CAGR)n

Frequently Asked Questions (FAQ)

Why is CAGR a better measure than absolute returns?

Absolute returns only tell you the total growth of an investment from start to finish, without considering the time period. For example, a 100% return sounds great, but it's much more impressive if it happened in 2 years (41.4% CAGR) than in 10 years (7.2% CAGR). CAGR provides a standardized, annualized figure that makes it easy to compare the performance of different investments over different timeframes.

What are the limitations of CAGR?

CAGR's main limitation is that it is a smoothed-out representation of growth. It does not reflect the volatility of an investment. An investment might have had significant ups and downs year-on-year, but the CAGR will only show a single, steady growth rate.

How can I use the Reverse CAGR function for goal planning?

Reverse CAGR is an excellent tool for financial goal planning. For instance, if you want to know how much your current investment of ₹5 lakh will grow in 10 years for your child's education, you can input an expected CAGR (e.g., 12%) to see the projected final corpus. This helps you assess if you are on track to meet your financial goals.