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Compound Growth Rate Formula:
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The Compound Growth Rate (CGR) measures the mean annual growth rate of an investment over a specified time period longer than one year. It represents one of the most accurate ways to calculate and determine returns for individual assets, investment portfolios, and anything that can rise or fall in value over time.
The calculator uses the Compound Growth Rate formula:
Where:
Explanation: The formula calculates the constant rate of return that would be required for the present value to grow to the future value over the number of periods.
Details: CGR is crucial for investors to compare different investment opportunities, assess portfolio performance, and make informed financial decisions. It provides a standardized way to measure growth across different time periods and investment sizes.
Tips: Enter the final value, present value, and number of periods. All values must be positive numbers. The result will be displayed as a percentage representing the annual compound growth rate.
Q1: What's the difference between CGR and simple growth rate?
A: Simple growth rate calculates linear growth, while CGR accounts for compounding effects where growth builds upon previous growth.
Q2: How is CGR different from CAGR?
A: CGR and CAGR (Compound Annual Growth Rate) are essentially the same concept and are often used interchangeably.
Q3: What are typical CGR values for investments?
A: Stock market investments typically average 7-10% CGR annually, while bonds may yield 3-5%. Higher returns usually come with higher risk.
Q4: Can CGR be negative?
A: Yes, if the final value is less than the present value, CGR will be negative, indicating a loss over the period.
Q5: How frequently should I calculate CGR?
A: Regular calculation (annually or quarterly) helps track investment performance and make timely adjustments to your portfolio.