Whenever you invest, it is natural that you would like to know the returns you can attain over a while. This is why people use the CAGR calculator which helps you calculate the compound annual growth rate. On the other hand, no asset value is constant. After all, inflation causes the returns to change now and then. Because you must derive more value from it. Because of this, all capital returns happen to be much higher than the inflation. Hence, it is advisable to invest in a future value calculator which will grow over some time. To understand the difference between the CAGR calculator & future value calculator, keep reading this post.
What is CAGR?
Calculating your CAGR is a piece of cake if the returns are a bit constant, like the ones in cases of fixed deposits. But things can get a bit complicated as the returns change from one year to the other. An example can be used to explain this. Whenever you invest in equity, you could receive early returns of maybe 5% per year and 30% the following year. In situations like these, the CAGR calculator comes a bit in handy.
Why do you require a CAGR calculator?
If the returns differ, you must know how the investments have fared every year. You also need to understand how you can use the calculator and the various returns on types of investments. You can later compare them and use them to reshuffle the portfolios. For example: if your CAGR is 20% for 3 years for mid-cap funds and 10% for large-cap, you should pursue more cash in funds to divest them in bigger cap funds. This is the formula you must keep in mind while calculating the annual rate of growth.
What is a future value calculator?
Asset values are never constant. They always keep changing over periods for multiple reasons such as inflation and the returns that are earned towards it. So, when inflation erodes your capital, whatever return you earn from that will add value. Most of the time, returns on your capital happen to be much higher compared to inflation, which means your asset will also grow over some time. Hence, it is valuable for businesses and individuals to understand the future well and their assets. That’s where the requirement of a future value calculator comes from.
Why do you need to calculate it?
A future value calculator allows most individuals to understand whether the value of the savings is good enough to meet their needs a couple of years from now. If it is not good enough, they can always use the right measures by simply investing and saving more in assets that yield much higher results. Unlike CAGR, a future value calculator calculates your money’s future and can be used in deposit or bond certificates. People who provide you with financial products like auto loans, home loans, and credit cards so that they can understand the value of such assets.
So that was a look at the prime differences between the cagr calculator and the future value calculator. For more such interesting posts on stock and trade marketing, do follow our blog!