CAGR Calculator (Compound Annual Growth Rate)
If you hold VND-priced assets in Vietnam — a stock portfolio, fund certificates, gold, an apartment — you eventually want one honest number: how fast did this actually grow, per year? Quoting a total return is easy ("up 80%") but useless for comparison, because it hides how long it took. CAGR (Compound Annual Growth Rate) solves this: it is the single constant annual rate that turns your starting value into your ending value, accounting for compounding.
Take the calculator's example for foreigners: a fund position bought at 200.000.000 VND, worth 360.000.000 VND after 6 years. The total return is 80%, but dividing that by 6 gives 13.33%/year — which is wrong, because it ignores compounding. The correct CAGR is 10.29%/year: grow 200.000.000 by 10.29% each year for 6 years and you land exactly on 360.000.000 VND.
Why this matters when you live abroad. First, CAGR lets you compare across holding periods — a 3-year crypto bet, a 6-year fund, an 8-year property — all reduced to %/year, the same unit as a bank's posted deposit rate. Second, CAGR is almost always lower than the "average yearly return" people advertise, because a geometric mean is never greater than an arithmetic mean when returns vary. The marketing deck shows the bigger arithmetic average; CAGR shows the money you really have. Third, CAGR is nominal and VND-denominated — it says nothing about inflation or FX. To know whether you actually got richer in real terms, subtract Vietnamese inflation (and, if you'll repatriate, think about VND/your-home-currency moves).
How the calculator works
The formula
$$\text{CAGR} = \left(\frac{V_n}{V_0}\right)^{1/n} - 1$$
CAGR = (Vₙ / V₀)^(1/n) − 1
| Symbol | Meaning |
|---|---|
| V₀ | Beginning value (initial investment) |
| Vₙ | Ending value (value after n years) |
| n | Number of years held |
| CAGR | The smoothed compound annual growth rate |
The tool divides the ending value by the beginning value, raises that ratio to the power 1/n (the nth root), subtracts 1, and multiplies by 100. It also shows the total absolute return = (Vₙ − V₀)/V₀, which is not divided by years.
CAGR vs the arithmetic average
Dividing total return by the number of years double-counts nothing and compounds nothing, so it overstates growth. For the default example (10.000.000 → 25.000.000 VND over 5 years), total return is 150%; ÷ 5 = 30%/year. But growing at 30%/year with compounding for 5 years would reach 37.129.300 VND — far above the real 25.000.000 VND. Only 20.11%/year reconciles: 10.000.000 × (1 + 0.2011)^5 = 25.000.000 VND. CAGR is the geometric mean of the annual growth factors; the naive number is the arithmetic mean.
What CAGR ignores
- The path between the endpoints. Two assets with the same 20.11% CAGR can have wildly different volatility and drawdowns. CAGR is not a risk measure.
- Cash flows in or out mid-period. If you add or withdraw capital along the way, CAGR is the wrong tool — use IRR or a money-weighted return instead. FiMo has an IRR calculator for that.
- Start- and end-date sensitivity. Measuring from a market trough vs a peak produces very different CAGRs for the same asset.
- Inflation, taxes and fees. CAGR here is nominal. Real CAGR ≈ nominal CAGR − inflation. Pair this with FiMo's real-return tool to strip out inflation.
Worked example: 200.000.000 → 360.000.000 VND over 6 years
You buy fund certificates for 200.000.000 VND. After 6 years the position is worth 360.000.000 VND — a total return of 80%. The annualised rate:
CAGR = (360.000.000 / 200.000.000)^(1/6) − 1 = (1.8)^(1/6) − 1 = 10.29%/year.
The table below shows the smoothed path the calculator implies — the actual year-by-year values were almost certainly bumpier, but every year compounds at the same 10.29% to reproduce the endpoints:
| Year | Smoothed value at 10.29%/year |
|---|---|
| 0 (start) | 200.000.000 VND |
| 1 | 220.584.714 VND |
| 2 | 243.288.080 VND |
| 3 | 268.328.157 VND |
| 4 | 295.945.449 VND |
| 5 | 326.405.211 VND |
| 6 (end) | 360.000.000 VND |
Two takeaways. The naive "average" of 13.33%/year (80% ÷ 6) overstates the truth by roughly three percentage points — a gap that widens the longer the horizon. And the CAGR of 10.29% is the number to compare against a bank deposit rate or another fund: a 12-month VND deposit advertised near that level would have matched this fund's nominal growth, with far less volatility. Whether 10.29% was actually good depends on inflation over those 6 years — subtract it to get your real CAGR.
Frequently asked questions
What is CAGR?
CAGR (Compound Annual Growth Rate) is the single constant rate at which an investment would have grown each year, with compounding, to go from its starting value to its ending value. Example: 10.000.000 VND becoming 25.000.000 VND over 5 years is a CAGR of 20.11%/year, even though the total return is 150%. It puts investments of different lengths on the same %/year footing for comparison.
What is the CAGR formula?
CAGR = (Vₙ / V₀)^(1/n) − 1, where V₀ is the beginning value, Vₙ the ending value, and n the number of years. Verifiable example: (360.000.000 / 200.000.000)^(1/6) − 1 = 10.29%/year. Multiply by 100 for a percentage. That is exactly the calculation the tool above performs.
How is CAGR different from total return?
Total return = (Vₙ − V₀)/V₀ tells you the percentage gain on your original capital, with no reference to time. CAGR converts that gain into a per-year compounding rate. For 200.000.000 → 360.000.000 VND the total return is 80% but the CAGR is only 10.29%/year over 6 years. Use total return to answer "how much did I make", CAGR to answer "how fast per year".
Why not just divide total return by the number of years?
Because that ignores compounding and always overstates the rate. For 10.000.000 → 25.000.000 VND over 5 years, 150% ÷ 5 = 30%/year. But compounding at 30%/year for 5 years would reach 37.129.300 VND — well above the real 25.000.000 VND. Only the CAGR of 20.11%/year reproduces the actual ending value.
Does CAGR account for risk or volatility?
No. CAGR uses only the start and end values and ignores everything in between, so it says nothing about how bumpy the ride was. Two assets with an identical 20.11% CAGR can differ enormously in volatility and maximum drawdown. Treat CAGR as a return measure only, and look at standard deviation or drawdown separately to judge risk.
When should I use IRR instead of CAGR?
Use CAGR for a single lump sum with no cash flows in or out until the end. Use IRR when money moves in or out over time — regular contributions, partial withdrawals, or irregular dividends you reinvest. CAGR only looks at the two endpoints; IRR weights each cash flow by its timing. FiMo has a dedicated IRR calculator for those situations.
Is the CAGR shown here nominal or real?
It is nominal — inflation, taxes and fees are not removed. Your real CAGR is roughly the nominal CAGR minus average inflation over the same period. For instance a nominal 10.29%/year with 4% average inflation leaves a real CAGR near 6.29%/year. Use FiMo's real-return calculator to strip inflation out properly, especially over long horizons in VND.