Investment Details
Compound Growth Effect
Your returns are $54,041.77 more than simple interest!
CAGR
9.60%
Annual Growth Rate
Total Value
$250,000
After 10 years
Total Gain
+$150,000
150.0% return
Year-by-Year Growth Projection
Yearly Breakdown
| Year | Invested | Value | Returns | Growth |
|---|---|---|---|---|
| Year 5 | $147,979 | $158,114 | +$58,114 | 58.1% |
| Year 6 | $157,575 | $173,286 | +$73,286 | 73.3% |
| Year 7 | $167,171 | $189,914 | +$89,914 | 89.9% |
| Year 8 | $176,767 | $208,138 | +$108,138 | 108.1% |
| Year 9 | $186,362 | $228,111 | +$128,111 | 128.1% |
| Year 10 | $195,958 | $250,000 | +$150,000 | 150.0% |
Understanding CAGR Deeply
What is CAGR?
Compound Annual Growth Rate (CAGR) is one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time. Unlike average returns, CAGR accounts for the fact that returns are compounded over time, providing a “smoothed” annual rate.
The Formula
CAGR = [(Ending Value / Beginning Value)1/n] - 1*n = number of years
CAGR vs. IRR (Internal Rate of Return)
CAGR
Best for “point-to-point” investments with no intermediate cash flows (like a fixed deposit or a gold bar).
IRR
Best for investments with multiple cash flows (like SIPs, dividends, or rental income). IRR is more complex but more accurate for ongoing investments.
Investment Glossary
Absolute Return
The total non-annualized return on an investment. It tells you exactly how much your money has grown from start to finish, regardless of how long it took.
Total Gain
The total profit in currency units. Calculated as Final Value minus Initial Investment.
Simple Annual Return
Calculated by dividing the total return by the number of years. It fails to account for compounding and usually underestimates the effective growth of an investment.
Compounding Effect
This is the 'magic' of wealth creation. It represents the returns earned on top of previous returns. Over long periods, this usually exceeds the initial investment.
The Rule of 72
Want to know how quickly your money doubles? Divide 72 by your CAGR. For example, at a 12% CAGR, your money doubles in 72 / 12 = 6 years. This is a quick mental trick to visualize the power of compounding.
What is CAGR?
Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer than one year. It represents one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time.