Guesstimating CAGR
I am looking for guesstimating CAGR across long time horizons. eg An investment grew 16X in 25 years, what's the CAGR?
I am looking for ball park figures here.
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So for an investment to grow 16x in 25 years, that means that it has doubled four times (2^4 = 16). In 25 years, doubling 4 times means it doubles once every 6.25 years. Using the rule of 72, 72 / 6.25 = ~11.5%, so the CAGR would be ~11.5%. Using quick excel math 16^(1/25)-1 = 11.7% which is pretty close.
Impressed with the math. And amazing to think about how a realistic return like that can get so big in a relatively short span.
That in the words of Buffett, is the power of compounding.
great trick, thanks a ton mate
Download python and put this formula in a module.
def CAGR(endingvalue, beginningvalue, numberofyears): '''Ending value is divided by beginning value. That number is raised to the (1/#of years). 1 is subtracted from tis number. ''' return (endingvalue/beginningvalue)**(1/numberofyears)-1
This was the answer I got after I made this. CAGR(16,1,25) 0.11728713807222002
Edit: Only if you need to do this more than once of course. If you do need to do this more, than once and have other formulas to do. I'd love to help with that as I'm trying to learn python, which is why I made this for ya, and it is way more fun with financial formulas.
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