SHARE TERMINOLOGY

What is CAGR?

Replies (1)

Hai Sir, the follwing reply may clarify ur doubt,

Compound Annual Growth Rate - CAGR

 
What Does It Mean?
What Does Compound Annual Growth Rate - CAGR Mean?
The year-over-year growth rate of an investment over a specified period of time.

The compound annual growth rate is calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period being considered.

This can be written as follows:

Compound Annual Growth Rate (CAGR)
 
Investopedia Says
Investopedia explains Compound Annual Growth Rate - CAGR
CAGR isn't the actual return in reality. It's an imaginary number that describes the rate at which an investment would have grown if it grew at a steady rate. You can think of CAGR as a way to smooth out the returns.

Don't worry if this concept is still fuzzy to you - CAGR is one of those terms best defined by example. Suppose you invested $10,000 in a portfolio on Jan 1, 2005. Let's say by Jan 1, 2006, your portfolio had grown to $13,000, then $14,000 by 2007, and finally ended up at $19,500 by 2008.

Your CAGR would be the ratio of your ending value to beginning value ($19,500 / $10,000 = 1.95) raised to the power of 1/3 (since 1/# of years = 1/3), then subtracting 1 from the resulting number:

1.95 raised to 1/3 power = 1.2493. (This could be written as 1.95^0.3333). 
1.2493 - 1 = 0.2493
Another way of writing 0.2493 is 24.93%.

Thus, your CAGR for your three-year investment is equal to 24.93%, representing the smoothed annualized gain you earned over your investment time horizon.
(Source: www.investopedia.com)

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
13 October 2026
Accountant

Zerdi & Co. Chartered Accountants

Pune

B.Com

View Details
Company
10 October 2026
Accounts Associate Level 1

Abic and Mani Chartered Accountants

Kottayam

B.Com

View Details
Company
Featured 21 September 2026
Consultant - Reporting

Finrep Advisors LLP

Mumbai

CA

View Details
Company
07 October 2026
Senior Account Manager

Amplio Invest

Mumbai

M.Com

View Details
Company
ARTICLESHIP 28 September 2026
Junior Accountant

J S P M & Associates LLP

Pune

B.Com

View Details
Company
ARTICLESHIP 07 October 2026
Article Trainee/ CMA Trainee

RMA And Associates LLP

New Delhi

CA Inter

View Details
Company
20 September 2026
Semi Qualified CA

Navin & Associates

Mumbai

CA Inter

View Details
Company
ARTICLESHIP 01 October 2026
Articled Assistant

KPSN & Associates LLP

Chennai

CA Inter

View Details