Calculate Your CAGR
Your CAGR Result
This represents the annualized return on your investment
What is CAGR?
CAGR (Compound Annual Growth Rate) is the annualized rate of return that your investment would need to achieve, given its beginning and ending values over a specific time period. It smooths out volatility to show the average annual growth.
CAGR is useful for comparing investment performance across different time periods and asset classes. It tells you the steady annual rate at which your money grew, assuming you didn't add or withdraw funds during the period.
Formula: CAGR = (Ending Value / Beginning Value)^(1 / Years) - 1
CAGR Formula & Example
The Formula
CAGR = (Ending Value / Beginning Value)1/Years - 1
Example Calculation
Scenario: You invested ₹100,000 in a mutual fund 5 years ago. Today, it's worth ₹500,000.
Step 1: 500,000 / 100,000 = 5
Step 2: 51/5 = 50.2 = 1.3797
Step 3: 1.3797 - 1 = 0.3797 = 37.97% CAGR
Your investment grew at an average annual rate of 37.97%.
When to Use CAGR
- Comparing investments: Compare mutual funds, stocks, or bonds over different time periods fairly
- Measuring fund performance: Evaluate how well a mutual fund or portfolio has performed
- Assessing long-term returns: Smooth out market volatility to see true average annual growth
- Business growth analysis: Measure revenue or profit growth rates over multiple years
- Evaluating real estate: Calculate appreciation rates of property over time
Important Considerations
CAGR Assumes No Cash Flows
Simple CAGR assumes a lump-sum investment at the beginning. If you added money periodically (like SIPs), CAGR won't be accurate. Use XIRR for investments with multiple cash flows.
CAGR Smooths Volatility
CAGR shows the smooth annual growth rate but doesn't show how rough the journey was. A volatile investment might have the same CAGR as a stable one.
Past Performance ≠ Future Returns
Historical CAGR is not a guarantee of future returns. Market conditions change, and past growth rates may not repeat.
Time Period Matters
CAGR can vary significantly based on the start and end dates chosen. Avoid cherry-picking dates to get favorable results.
Doesn't Include Taxes or Costs
CAGR doesn't account for taxes, brokerage fees, or inflation. Your real net returns will be lower than the calculated CAGR.
CAGR vs. Simple Annual Return
| Aspect | CAGR (Compound Annual Growth Rate) | Simple Annual Return |
|---|---|---|
| Calculation | Uses compound formula; accounts for time period | Simple percentage change; ignores time |
| Use Case | Long-term investments; comparing different periods | Quick return calculation; single year performance |
| Accuracy for Multi-Year | More accurate over multiple years | Less accurate; doesn't show annual consistency |
| Example (₹100k → ₹400k in 4 years) | CAGR = 41.42% per year | Total return = 300% (75% annually, roughly) |
Frequently Asked Questions
CAGR assumes a lump-sum investment with no intermediate cash flows. XIRR (Internal Rate of Return) accounts for multiple contributions and withdrawals at different times. For SIP (Systematic Investment Plan) investments, XIRR is more accurate.
Yes. If your ending value is lower than your beginning value, CAGR will be negative. For example, if you invested ₹100,000 and it decreased to ₹50,000 over 5 years, your CAGR would be negative (~-20.55%).
CAGR uses compounding (your growth earns growth). Average annual return is the simple average of each year's return. CAGR is typically lower than simple average for volatile investments and is the more accurate representation of compounding.
You can use decimal values. For example, if your investment period is 6 months, enter 0.5 years. The calculator will annualize the return accordingly. Note: CAGR is less meaningful for very short periods.
CAGR is a useful metric but not the only one. Also consider volatility, risk (standard deviation), Sharpe ratio, and fund manager consistency. Compare CAGR across funds of the same category over the same period for fair comparison.
No. CAGR is the nominal return (before inflation). To calculate the real return (after inflation), subtract the inflation rate from CAGR. Example: If CAGR is 12% and inflation is 5%, your real CAGR is approximately 7%.
Checking annually or quarterly is reasonable. Avoid checking too frequently (weekly or monthly) as short-term volatility doesn't reflect true investment performance. For long-term goals, focus on multi-year CAGR rather than short-term returns.
This CAGR calculator provides estimated figures for informational purposes only. Actual returns depend on market conditions, fees, taxes, and other factors. This is not financial advice. Consult with a qualified financial advisor before making investment decisions.