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Experimental · Tools

CAGR

A 150% return sounds impressive until you learn it took five years. CAGR restates any gain as the steady annual rate that would have produced it.

Open the page5 parts/experimental/tools/cagr
CAGR — the live page, with each part numbered
Three numbers, nothing else
Where the money started, where it ended, and how long that took.
CAGR — captured from the live page. Hover a number to see what it is.
What

What this page is

Three inputs, one answer. Give it what an investment was worth at the start, what it is worth now and how many years passed, and it returns the compound annual growth rate.

Its purpose is comparison. A three-year holding and an eight-year one cannot be judged against each other on total return, but they can on CAGR.

Why

Why it helps you

If you trade
Days to weeks · you care about timing and the crowd.
  • Almost nothing to offer a short-horizon trader — the shortest period the field accepts is measured in years, and trades are not.
  • One legitimate use: converting a year of trading results into a single annual figure you can honestly compare against simply holding an index.
If you invest
Months to years · you care about quality and price paid.
  • This is squarely an investor's calculator. It is the standard way to describe a long holding, and the number to quote when comparing your result against a fund, a fixed deposit or the index.
  • The gap between CAGR and total return is the clearest illustration of what time does. Rs 1,00,000 growing to Rs 2,50,000 is 150% in total but only about 20% a year.
When · Where

When to use it, and where to find it

  • When reviewing a holding you have owned for more than a year.
  • When comparing two investments held for different lengths of time.
Where — Top navigation → Experimental → Tools → CAGR
How to

Try it — a short walkthrough

  1. 1
    Enter the two values
    Initial Value is what it was worth when you started; Final Value is what it is worth now. If the final is lower, CAGR comes out negative.
    See this part in detail →
  2. 2
    Set the period
    Decimals are allowed, so a two-and-a-half-year holding is 2.5. The field steps in halves and is capped at 20 years.
    See this part in detail →
  3. 3
    Read CAGR against total return
    The headline is the yearly rate; the chips beside it give the absolute gain, the whole-period return and the multiple. Comparing the first two is the useful reading.
    See this part in detail →
Prefer to be shown?
Open CAGR and press ? in the top bar. The guided tour walks the same parts on the live screen, in English or नेपाली, and you can pause it at any step.
In detail

Every part of the page

In the order you meet them on screen, each with a close-up of the real thing. The numbers match the dots on the figure above.

1

Three numbers, nothing else

Where the money started, where it ended, and how long that took. CAGR needs no rate — it works the rate out for you.

How — Use the real values from your own statement, not rounded ones, if you want the rate to be exact.

Three numbers, nothing else — on the live page
2

Initial Value

What the investment was worth at the beginning.

How — It must be greater than zero — CAGR is undefined from a zero base, and the page then shows 0%.

  • The Final Value box below it is the same investment at the end; if it is lower, the CAGR comes out negative.
Initial Value — on the live page
3

Period

How many years passed between the two values. Decimals are fine — use 2.5 for two and a half years.

How — Get this right: a wrong period distorts the yearly rate more than anything else on the page.

  • This is the "years" in ((Final ÷ Initial)^(1 ÷ years) − 1).
Period — on the live page
4

The CAGR

The single steady yearly rate that would have taken your initial value to the final value over that period.

How — Use it to compare investments held for different lengths of time — that is what it is for.

  • CAGR = ((Final ÷ Initial)^(1 ÷ years) − 1) × 100.
  • It SMOOTHS the ups and downs — the actual year-by-year returns were almost certainly uneven.
The CAGR — on the live page
5

Gain, total return, multiple

Absolute Gain is the plain rupee difference. Total Return is the growth across the WHOLE period. Multiple is how many times your money grew.

How — Compare Total Return with the CAGR above — the gap widens the longer the period.

  • Absolute gain = Final − Initial · Total return = (Final ÷ Initial − 1) × 100 · Multiple = Final ÷ Initial.
  • Total return is always larger than the CAGR whenever the period is more than one year.
Gain, total return, multiple — on the live page
Detail

Reading the numbers

  • CAGR = ((final value ÷ initial value)^(1 ÷ years) − 1) × 100.
  • Total return = (final ÷ initial − 1) × 100. It is always larger than CAGR over a period longer than one year.
  • Absolute gain = final value − initial value. Multiple = final ÷ initial.
  • CAGR is only defined when the initial value and the period are both above zero; otherwise the page shows 0.
  • Both values are capped at Rs 1 crore and the period at 20 years. No charges, tax or inflation are applied anywhere.
Honest limits

What it does not do

  • CAGR is a smoothed average and says nothing about the path. Two holdings with the same CAGR can have had entirely different journeys, one of them unbearable.
  • It describes what happened, not what will. Extending a past CAGR forward is the most common misuse of this number.
  • Brokerage, Capital Gains Tax, dividends received and inflation are all excluded. Real after-tax, after-cost CAGR is lower than what this shows.
  • Adding money during the period breaks the calculation. For monthly contributions use the SIP calculator instead.