CAGR (Compound Annual Growth Rate) tells you the steady yearly rate at which an investment would have grown to reach its final value. Real investments go up and down from year to year. CAGR smooths that into one number, which makes it easy to compare a mutual fund, a stock, a property or a business's revenue over different periods.
How to use the CAGR calculator
- Enter the initial value (what you invested or the starting value).
- Enter the final value (the current or selling value).
- Enter the duration in years.
You will see the CAGR, the absolute return and the total gain. The year-wise breakdown shows how the value would grow each year at that CAGR.
CAGR formula
CAGR = (Final value ÷ Initial value)^(1 ÷ n) − 1- n = number of years
Multiply by 100 to get a percentage.
Example
You invested ₹1,00,000 and it is worth ₹2,50,000 after 5 years.
- CAGR = (2,50,000 ÷ 1,00,000)^(1 ÷ 5) − 1
- CAGR = 20.11% a year
- Absolute return = 150%
- Total gain = ₹1,50,000
Why not just divide 150% by 5?
Dividing gives 30% a year, which overstates the growth. Each year's growth builds on the previous year's value, so a steady 20.11% a year is enough to turn ₹1 lakh into ₹2.5 lakh in 5 years. CAGR is the honest way to express a multi-year return.
CAGR, absolute return and XIRR
| Measure | What it tells you | Best for |
|---|---|---|
| Absolute return | Total growth from start to end | Short periods, under a year |
| CAGR | Smoothed yearly growth rate | One-time investments over several years |
| XIRR | Yearly return with many cash flows | SIPs and investments with multiple deposits or withdrawals |
For a SIP, CAGR does not work well because each instalment is invested for a different time. Use XIRR for that, which most mutual fund apps show.
FAQ
What is a good CAGR?
It depends on the investment and the risk. Compare CAGR with a benchmark: a fund's CAGR with its index, or an investment's CAGR with what a safe option such as an FD would have given over the same period.
Can CAGR be negative?
Yes. If the final value is lower than the initial value, the CAGR is negative, showing the average yearly loss.
Does CAGR show the risk of an investment?
No. CAGR hides the ups and downs along the way. Two investments with the same CAGR can have very different year-to-year swings.
How do I project the future value from a CAGR?
Use the lumpsum calculator: enter your amount, the CAGR as the expected return, and the number of years.