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CAGR Calculator in Months

Monthly CAGR Formula:

\[ CAGR_{monthly} = \left(\frac{End}{Begin}\right)^{\frac{1}{months/12}} - 1 \]

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1. What is Monthly CAGR?

The Monthly Compound Annual Growth Rate (CAGR) measures the mean annual growth rate of an investment over a specified time period of less than or equal to one year, expressed in monthly terms. It provides a smoothed annualized return figure.

2. How Does the Calculator Work?

The calculator uses the Monthly CAGR formula:

\[ CAGR_{monthly} = \left(\frac{End}{Begin}\right)^{\frac{1}{months/12}} - 1 \]

Where:

Explanation: The equation annualizes growth by raising the total return ratio to the power of (12/months) and subtracting 1.

3. Importance of Monthly CAGR

Details: Monthly CAGR is particularly useful for comparing investments with different time horizons or evaluating short-term performance in annualized terms.

4. Using the Calculator

Tips: Enter ending and beginning values in USD, and the time period in months (1-12). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is monthly CAGR different from regular CAGR?
A: Monthly CAGR annualizes returns from periods shorter than one year, while regular CAGR typically uses yearly periods.

Q2: What does a negative monthly CAGR indicate?
A: A negative value indicates an annualized loss over the measurement period.

Q3: Can I use this for periods longer than 12 months?
A: Yes, but the result will still be an annualized rate. For multi-year periods, standard CAGR may be more appropriate.

Q4: How does compounding frequency affect the result?
A: This calculation assumes continuous compounding. Different compounding frequencies would require a different formula.

Q5: Why annualize monthly returns?
A: Annualization allows comparison of returns across different time periods on a common basis.

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