How To Calculate CAGR For Stocks?

Although, the CAGR calculator does the job of calculating the CAGR for you, it is best to understand the CAGR formula to calculate and understand how investments grow.

In case you know the initial investment and the final amount, you can use the basic geometric mean approach to calculate the CAGR returns. The formula is as under.

Assume that you invest Rs.10,000, which is expected to grow to Rs.19,000 at the end of 5 years. Obviously, here the principal is directly being redeemed at premium so you must assume that returns are reinvested and hence CAGR will be the right method. Let us apply the formula now.

CAGR = {(Future Value / Investment Value) ^ (1 / n)} - 1

Hence CAGR = {(19,000 / 10,000) ^ (1 / 5)} - 1

That means, we first calculate the 5th root of 1.90 = 1.1369

Now (1.1369 - 1) = 0.1369 or 13.69%Now (1.1369 - 1) = 0.1369 or 13.69%

In other words, the investment of Rs.10,000 growing to Rs.19,000 in 5 years assumes a CAGR return of 13.69%, which can be approximated to 13.70%.

Here are some simple steps you need to use the CAGR calculator online.

a) Enter your initial investment that you are putting into the investment today.

b) Enter the tenure of the investment in number of years like 5, 8, 10 etc.

c) In the next step, put down the expected value of the investment at the end of the tenure laid out in (b). This value is either known in case of assured return investments or you have to estimate this final value.

d) Once these 3 items are entered, you get the CAGR percentage in a jiffy.

That is how simple the CAGR calculator is in practice.