Quick Answer
CAGR (Compound Annual Growth Rate) is calculated as CAGR = (Final Value ÷ Initial Value)^(1 ÷ Years) − 1. For example, an investment that grew from PKR 100,000 to PKR 180,000 over 5 years has a CAGR of (180,000 ÷ 100,000)^(1/5) − 1 = 12.47% per year.
What Is CAGR Calculator?
CAGR, or Compound Annual Growth Rate, is the single annualised rate at which an investment would have grown from its starting value to its ending value if it had grown at a perfectly steady rate each year. In reality, investments rarely grow at the same pace every year — the stock market might return 30% one year and −10% the next — but CAGR smooths those fluctuations into one easy-to-compare number.
CAGR is the gold standard for comparing investment performance because it accounts for compounding. A fund that returned 50% in year one and then fell 20% in year two has not given you a 15% average annual return — it has actually given you a CAGR of about 9.5%. Simple averaging gives a misleading answer; CAGR does not.
Investors use CAGR to compare mutual funds, stocks, real estate, and even business revenue growth. A business that grew revenue from PKR 10 million to PKR 25 million in 4 years has a revenue CAGR of 25.7%, which is a far more useful single number than saying 'it grew by 150% in total'.
How to Use
- 1Select 'Find CAGR' mode to calculate the annual growth rate between two values, or 'Project Growth' to see what your investment will be worth at a given CAGR.
- 2Enter the initial value — your starting investment amount or beginning portfolio balance.
- 3For 'Find CAGR': enter the final (current) value and the number of years between the two values.
- 4For 'Project Growth': enter the CAGR percentage you expect and the number of years ahead.
- 5Read your result: CAGR % in 'Find' mode, or projected future value in 'Project' mode. The year-by-year table shows how the value grows each year.
Formula
CAGR = (Final Value ÷ Initial Value)^(1 ÷ Years) − 1Multiply result by 100 to get the percentage
FV = Initial Value × (1 + CAGR)^YearsUse this to project what an investment will be worth
Total Return = (Final − Initial) ÷ Initial × 100This is the simple total return, not annualised
Example: PKR 200,000 investment grew to PKR 450,000 in 7 years
- Initial value = 200,000
- Final value = 450,000
- Years = 7
- CAGR = (450,000 ÷ 200,000)^(1 ÷ 7) − 1
- = (2.25)^(0.1429) − 1
- = 1.1235 − 1 = 0.1235
Tips & Things to Know
- CAGR tells you nothing about volatility — two funds with identical CAGRs may have had very different risk profiles along the way. Always look at CAGR alongside standard deviation or maximum drawdown.
- For Pakistan Stock Exchange (PSX), the historical 10-year CAGR of the KSE-100 index has varied widely (10–18%) depending on the period. Use 10–12% as a conservative benchmark for long-term projections.
- Real estate in major Pakistani cities (Karachi, Lahore, Islamabad) has historically delivered CAGRs of 8–15% in nominal terms. Adjust for inflation (currently high) to get the real CAGR.
- When comparing two mutual funds or investment options, always compare CAGRs over the same time period. A 5-year CAGR vs a 3-year CAGR is not a fair comparison.
- CAGR ignores cash flows — if you added money or withdrew money during the period, CAGR will give inaccurate results. For portfolios with regular contributions, use XIRR instead.