# Compound Annual Growth Rate

## CAGR – Compound Annual Growth Rate

Compound Annual Growth Rate is the way to calculate the annual return for an investment over a certain period. e.g., Mutual fund or Stock or Business. Beginning Balance = Invested unit price of Mutual fund or Stock

Ending Balance = Current unit price of that Mutual fund or Stock

N = Number of years

### CAGR Calculation

Let see how to CAGR is calculated for Mutual Fund and you can use this formula in google sheet.

Example 1: 10 rupees per unit at the time of investing and after one year unit value is increases to 14 rupees per unit.

Beginning balance = 10, Ending balance = 14 & Number of years = 1

= (14/10)^(1/1)-1= 0.4*100= 40

Example 2: 10 rupees per unit at the time of investing and after two year unit value is increases to 14 rupees per unit.

Beginning balance = 10, Ending balance = 14 & Number of years = 2

= (14/10)^(1/2)-1= 0.1832*100= 18.32

You can use this link to calculate CAGR online: CAGR Calculator – Compound Annual Growth Rate (CAGR) Calculator Online (groww.in).

### Check with Mutual Fund

Fund Name: SBI Banking & Financial Services Fund Direct – Growth

Launch Date: 26 Feb 2015

Initial price per unit at fund launched was ₹10

Now price per unit (09 Jan 2021) is : ₹23.069

Number of years of this fund from launch date: 5 years, 10 months, now we consider 6 years for easy understanding

CAGR % of this fund is 14.95%

### Conclusion

CAGR is help to find the good mutual fund in the past history and it helps to make decision stay invested in that fund or not over the period.

Check out other article RCA in Mutual