CAGR Calculator
Find the single steady annual growth rate that would carry your investment from its starting value to where it ended up — the standard way to compare returns across different time periods.
What CAGR actually tells you
The steady rate that gets you there
CAGR is the single constant annual rate that would take your initial value to your final value — it smooths over a journey that was almost certainly bumpy in reality.
Why duration matters
A 100% absolute return over 10 years is a very different result from a 100% return over 2 years — CAGR makes returns across different timeframes comparable.
Use XIRR for multiple cash flows
CAGR assumes a single investment and a single exit. If you added or withdrew money along the way (like a SIP), use the XIRR Calculator instead for an accurate annualised return.
What is CAGR?
CAGR (Compound Annual Growth Rate) is the single, constant annual rate of return that would take an investment from its starting value to its ending value over a given number of years, assuming the growth compounded smoothly every year. It answers a very specific question: "If this investment had grown at exactly the same rate every single year, what would that rate have to be?"
CAGR is one of the most widely quoted numbers in finance — used to describe mutual fund performance, company revenue growth, GDP growth, and virtually any "value A became value B over N years" scenario. Its popularity comes from a simple strength: it compresses a messy, volatile multi-year journey into one comparable number.
Why a simple average return is misleading
A common mistake is to compute "average annual return" by simply adding up each year's percentage return and dividing by the number of years. This produces a number that is almost always too optimistic, because it ignores compounding and the asymmetric impact of losses.
Suppose an investment gains 50% in year 1 and loses 50% in year 2. The simple average return is (50% + −50%) ÷ 2 = 0%, suggesting you broke even. But ₹100 growing 50% becomes ₹150, and ₹150 falling 50% becomes ₹75. You actually lost 25% of your money — the CAGR over those 2 years is roughly −13.4% per year, not 0%. Simple averaging hides this entirely.
CAGR avoids this trap because it works backward from the actual starting and ending values, not from averaging a series of percentage changes.
The CAGR formula, explained
CAGR = (Final Value ÷ Initial Value)1/n − 1
- Final Value — what the investment is worth at the end of the period.
- Initial Value — what you started with.
- n — the number of years between the two values.
The exponent 1/n is what makes this a geometric mean rather than a simple arithmetic average — it's the same mathematical operation as asking "what number, multiplied by itself n times (compounded), gets me from 1 to the ratio Final/Initial?"
A worked example, step by step
Suppose an investment grows from ₹1,00,000 to ₹2,00,000 over 5 years — it doubled.
| Step | Value |
|---|---|
| Initial value | ₹1,00,000 |
| Final value | ₹2,00,000 |
| Ratio (Final ÷ Initial) | 2.0 |
| Years (n) | 5 |
| CAGR | 14.87% |
Notice that the absolute return here is a simple 100% (it doubled), but the CAGR of 14.87% is the figure you'd actually use to compare this investment against another one with a different time horizon — for example, an investment that doubled in 3 years would have a much higher CAGR (~26%) despite an identical 100% absolute return.
CAGR vs XIRR vs absolute return
Absolute return
- Simple % change between two values
- Ignores how long it took entirely
- Useful only for quick "did I make money" checks
CAGR
- Annualises a single lumpsum's growth over time
- Assumes one investment, one exit, no in-between cash flows
- Makes returns of different durations comparable
If you added or withdrew money at multiple points — a SIP, partial redemptions, top-ups — CAGR's "one entry, one exit" assumption breaks down and will give a misleading number. That's exactly the scenario the XIRR Calculator is built for: it accounts for every individual cash flow and its exact date, producing an accurate annualised return even for an irregular investment history.
What counts as a "good" CAGR?
This depends heavily on the asset class and time period, but as rough reference points commonly used in Indian markets:
- Below 6%: Roughly in line with bank fixed deposits and high-quality debt instruments — reasonable for capital preservation, weak for long-term wealth building.
- 10–14%: Broadly in line with long-term historical Indian equity index returns — a commonly used benchmark range for diversified equity mutual funds.
- 15%+: Strong performance, typically associated with concentrated equity bets, smaller-cap exposure, or favourable market cycles — usually harder to sustain consistently over very long periods.
What CAGR doesn't tell you
- The path taken. Two investments can have an identical CAGR over 10 years while one rose steadily and the other crashed 60% in year 3 before recovering. CAGR is blind to volatility along the way.
- Risk. A high CAGR achieved through a single high-conviction bet that could easily have gone the other way is a very different proposition from the same CAGR achieved through a diversified, lower-volatility approach.
- Multiple cash flows. As covered above, CAGR is only valid for a single starting and ending value — not for SIPs or any investment with interim contributions or withdrawals.
How to use this calculator
- Enter the initial value — what you started with, or paid.
- Enter the final value — what it's worth now, or what it sold for.
- Enter the duration in years between the two.
- Read the CAGR alongside the simple absolute return, to see both the annualised and the total picture.
- If your investment involved multiple contributions or withdrawals rather than a single lumpsum, use the XIRR Calculator instead for an accurate figure.
Frequently asked questions
No. CAGR is a smoothed, theoretical constant rate — it's the single rate that, if applied every year, would produce the same final result. Your actual year-by-year returns almost certainly varied above and below this figure; CAGR doesn't claim otherwise, it just summarises the net effect.
Yes. If your final value is lower than your initial value, CAGR will be negative, correctly reflecting an annualised loss over the period. This calculator handles that case directly — just enter a final value below the initial value.
Because CAGR is the annualised, compounded rate, while a simple percentage gain ignores time entirely. A 100% gain over 5 years is a CAGR of about 14.87%, not 100% per year — the longer the period over which a given total gain occurred, the lower the annualised rate needed to explain it.
Yes, this is one of CAGR's most common uses — since both produce a single starting and ending value over a known period, CAGR puts them on the same annualised footing for comparison, regardless of how each one actually compounds internally (annually, monthly, etc.).
Mathematically, CAGR is defined for any duration greater than zero, including fractional years (e.g., 1.5 years), and this calculator accepts decimal year values. That said, CAGR is most meaningful over multi-year periods; for very short durations, the annualised figure can look extreme even from a modest absolute gain or loss.
No, the CAGR shown here is a nominal rate, not inflation-adjusted. To get a real (inflation-adjusted) growth rate, you'd need to separately deflate both the initial and final values by a price index, or subtract an estimated inflation rate from the nominal CAGR as an approximation.