CAGR Calculator

CAGR calculator is one of the useful online tools as it stands for the compound Annual Growth Rate. It’s a way to measure how much a business has grown over the year in a distinctive period, so this will also help you to understand how well a company is doing in a competitive market. 

So here you can calculate CAGR very easily with the help of online tools, One such tool is an RWR CAGR calculator, as this is very simple to use and gives accurate results to help to track the company growth and also can know the lack of growth over a time, by the help of this tool. So let’s have a look at this Calculator in detail.

What is CAGR?

CAGR is an annual rate that tells people how companies have grown in the past years and how they are expected to grow nowadays. So it simply means that it represents the annual return on an investment which would be required to grow from the initial value so its final value will be over a specific period. 

How RWR CAGR Calculator Help You?

If you understand the term then it’s easy to know that the CAGR calculator helps you to find the yearly rate of growth on a variable, so if you know the starting value, the end value, and the duration. 

So it shows the average growth rate over time, and it smoothens out any volatility that might happen in a certain period to give a general figure, so it will show you the efficiency of the growth of a variable and it is not just overall growth. 

For example, if you are an investor and using the compound Annual Growth Rate calculator as you all know it is an online tool to check how fast the portfolio is rising over time by using this compound Annual Growth Rate online tool.

How Does the CAGR Calculator Work? 

A RWR CAGR calculator is a free online tool for you all which is available on this RWR website that helps you to determine the compound annual growth rate of any investment. So if you want to use this RWR calculator tool then you just have to simply input the initial investment amount, the final value of the investment, and the period over which the investment has grown.

Then the calculator will provide you with the compound annual growth rate that is needed to achieve the fixed return. So the CAGR formula is used in the background to complete the calculation efficiently.

How to Calculate CAGR?

Here are the following CAGR formulas that are used to calculate the CAGR of investment or any other metric that can grow over the year,

CAGR= {(EV/BV)1/n - 1} x 100

Where, EV= Ending Value BV= Beginning Value n= Number of Year

To calculate the CAGR of an investment, you need to know these details,

• To calculate the CAGR, divide the value of an investment at the end of the period by its value at the beginning of that period.
• After that, raise the result to the exponent of one divided by the n (number of years).
• Then subtract one from the subsequent result.
• Lastly, you just have to multiply by 100 to convert the answer into the percentage.

Moreover, the CAGR formula gives the annualized rate of return, as it is useful for comparing the performance of the different investments over the period.

As the above table shows the formula which depends on three variables, as we discussed already, so when you enter all three variables the CAGR calculator will show the rate of return on the investment.

For example, the initial value of the investment is INR20,000, and the final value is INR30,000 in 3 years, number of years is 3.

So it calculated to be like,

CAGR= {(EV/BV)1/n - 1} x 100

{(30,000/15,000)⅓ - 1} x 100

CAGR= 14.47%

How to Calculate Absolute Return?

Here, you can also calculate the absolute return on the investment by using the CAGR calculator,

Absolute Return= Ending Value - Beginning Value/ Beginning Value* 100

So, let's assume the same example which we have recently discussed in this article where,

• EV= 30,000
• BV= 20,000

{(30,000 - 20,000)/ 20,000}* 100

= 50%

How To Use the RWR CAGR Calculator?

To use the RWR CAGR calculator online, you simply have to enter the following values on the calculator, so let’s have a look at it,

• Initial Investment: Here you have to enter the amount of money that you have invested.
• Final Value Cost: Now here you need to enter the current value of the investment, so the CAGR you are measuring.
• Duration of Investment: Now enter the number of years for which the investment was held.

So after all the input, these values are the CAGR calculator that gives you the CAGR for the investment for the specific period by using the above formula. So if we take the example of buying shares, then you simply have to take the following steps to find out the CAGR of the investment, 

• Enter the Initial Investment, of 20,000
• Enter the Final Cost, of  30,000
• Enter the duration of the Investment, of 3

The CAGR calculator automatically calculates and shows the CAGR of that particular investment which will be 14.47%

Advantages and disadvantages of CAGR Calculator

Every calculator has their advantages and disadvantages, same CAGR calculator also has their calculator,

Advantages

Here you can use the RWR CAGR calculator to make the right investment decision, so it helps you to determine the annual rate of return from the investment against which is a relevant benchmark and also analyze the investment decision,

• Here in the CAGR calculator, you can compare the performance of the stock against the peers or the industry as a whole by using the compound annual growth rate.
• The RWR CAGR calculator is a very simple and easy-to-use tool, all you have to do is enter the initial and the final value with the number of the year of the investment, and this will show you the compound annual growth rate.
• Here you can also use the compound annual growth rate to determine that the investment in your portfolio has over some time.
• The calculator can help you to calculate the return from your mutual fund investment also, in fact, you can compare the mutual fund's average annual growth rate overtime against the benchmark. This will allow you to choose the mutual fund based on the past return.

Disadvantage 

Moreover, the CAGR is a useful concept, as it has some drawbacks, so here is the following weakness of the CAGR calculation, let’s have a look at it,

• The calculator is only suitable for the lump sum investment, so in the case of SIP investment, there is a systematic investment at various time intervals which is not considered as only the beginning value is taken into account for the calculator of compound annual growth rate.
• Moreover, if the calculation is related to CAGR, then only the beginning and ending values are taken into account. So it assumes that there is a growth that is constant over the duration of time and it does not consider the aspect of volatility.
• The compound annual growth rate. Does not account for the inherent risk of an investment, so when it comes to the equity investment, the risk-adjusted return is more important than the compound annual growth rate. So here you will use the Sharpe ratio and the Treynor ratio to determine the risk-return bonuses of the investment.

Also Check - Rental Yield Calculator

Conclusion

CAGR is one of the valuable calculators for investors to know the performance of their investment over time. So here we have discussed all such details to know about the CAGR calculator before using the RWR CAGR calculator, as this is one of the best online tools to calculate your compound annual growth rate.

FAQs

What is the formula for compound annual growth rate?

 {(Ending Value/Beginning Value)1/n - 1} x 100

What is the formula for Absolute Returns?

{(Ending Value - Beginning Value)/ Beginning Value}* 100

What is the difference between CAGR Retrun and  Absolute Returns?

There is a simple difference between CAGR and Absolute return, 

• The Absolute Return shows the total growth in the investment value and ignores the number of the period. So this return is useful when the period is less than one year.
• CAGR Return shows the average yearly growth rate in the investment.