CAGR Calculator (Annualized return for meeting your goal)

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What is CAGR?

Compound Annual Growth Rate (CAGR) is a crucial financial concept that helps individuals or investors assess the annualized growth rate of an investment over a specific period. It provides a standardized way to understand how an investment or asset has performed, making it easier to compare investments.

The Formula for CAGR: The formula for calculating CAGR is relatively straightforward:

CAGR = [(EV / BV) ^ (1 / n)] - 1

Where:

  • EV is the Ending Value (the final value of the investment or asset).
  • BV is the Beginning Value (the initial value of the investment or asset).
  • n is the number of years.

CAGR is expressed as a percentage, which makes it easier to understand and compare.

Using the CAGR Calculator – A Simple Guide

  1. What’s the Calculator For? This calculator helps you figure out how your money grows when you save or invest it over time.
  2. Enter Your Money Goals:
  • Start by telling the calculator how much money you want to have in the future. For example, if you want Rs. 1,000,000, just type “1000000.”
  • Next, let the calculator know how much money you’re putting in now. This is the amount you’re starting with. If it’s Rs. 500,000, type “500000.”
  • Then, tell it how long you plan to keep your money invested. If it’s 5 years, type “5.”

3. Hit the “Calculate” Button: Click the “Calculate” button, and the calculator will do some math for you.

4. Check the Results:

  • You’ll see two important numbers:
    • Compound Annual Growth Rate (CAGR): This is like the average speed your money is growing every year, shown as a percentage. The higher, the better.
    • Absolute Return (%): This tells you how much more money you’ll have compared to what you started with, also as a percentage. A positive number means you’ll make money. This is not year on year return, this will calculate how much you money has grown in the whole time period.

5. What Do the Results Mean?

  • CAGR tells you how fast your money is growing on average each year.
  • Absolute Return (%) shows you the total extra money you’ll have compared to what you began with, in terms of a percentage.
  • Make Informed Decisions: Use these results to help plan your savings and investments wisely. It gives you an idea of how your money can grow over time.

That’s it! The CAGR calculator makes it easier for you to see how your money can grow when you save or invest it. It’s a handy tool for making smarter financial choices.