CAGR Calculator
Find the compound annual growth rate of any investment. CAGR smooths out the ups and downs into a single yearly figure, making it easy to compare returns across stocks, funds, or any asset held for different periods.
Growing from ₹1 L to ₹2.5 L over 5 years is a CAGR of about 20.11% per year — a total absolute return of 150.0%.
How the CAGR Calculator works
CAGR converts the total growth of an investment into a single annual rate, as if it had grown by the same percentage every year. It is the standard way mutual funds, indices, and portfolios report long-term returns precisely because it strips out the noise of individual good and bad years and gives you one comparable number.
The CAGR formula
- CAGR = (Final Value ÷ Initial Value)(1 ÷ Years) − 1
- Initial Value — what you started with
- Final Value — what it is worth now or at maturity
- Years — the holding period
When to use CAGR
Reach for CAGR whenever you want to compare investments held for different lengths of time — say a stock you held for 3 years against a fund you held for 7. It is the fairest single measure of growth. Just remember it tells you nothing about the bumpiness of the journey, so pair it with a look at volatility before judging how much risk you took to earn that return.
Frequently asked questions
What is CAGR?
CAGR (Compound Annual Growth Rate) is the smoothed annual rate at which an investment would have grown if it had compounded steadily every year. It answers the question "what single yearly return turns my starting value into my ending value over this period?" and lets you compare investments held for different lengths of time on a like-for-like basis.
How is CAGR calculated?
CAGR = (Final Value ÷ Initial Value)^(1 ÷ Years) − 1, expressed as a percentage. For example, ₹1,00,000 growing to ₹2,50,000 over 5 years gives a CAGR of about 20.1% — the steady annual rate that bridges the two values.
How is CAGR different from absolute return?
Absolute return is the total percentage gain over the whole period, ignoring time — ₹1 lakh becoming ₹2.5 lakh is a 150% absolute return whether it took 2 years or 10. CAGR annualises that gain, so it accounts for the holding period and is the fairer way to compare two investments held for different durations.
What is a good CAGR for equity in India?
Over long periods, the Nifty 50 has delivered roughly 11–13% CAGR including the recent years, and good actively-managed equity funds have done a few percentage points better. A CAGR consistently above inflation (around 5–6%) builds real wealth; for equity over 7–10 years, 12% or more is generally considered solid.
Does CAGR show the year-to-year volatility?
No — that is its main limitation. CAGR assumes a perfectly smooth ride, but real markets swing up and down. Two funds with the same CAGR can have very different paths; one may have been far more volatile. Look at CAGR alongside measures like standard deviation or maximum drawdown to understand the risk you took to earn that return.
What is the difference between CAGR and XIRR?
CAGR works only for a single lumpsum — one entry value and one exit value. XIRR (Extended Internal Rate of Return) handles multiple cash flows at different dates, which is exactly what a SIP or a portfolio with several purchases and redemptions looks like. For a monthly SIP, use XIRR; for a one-time investment, CAGR and XIRR give the same answer.
Should I use CAGR or absolute return to judge a mutual fund?
For periods longer than a year, use CAGR — SEBI itself mandates that mutual funds disclose returns over one year as CAGR, not absolute. Absolute return is fine for holdings under 12 months. Quoting a 150% absolute return without the time frame is misleading, since it could span 3 years or 13.
Can CAGR be negative?
Yes. If your final value is lower than your initial value, the CAGR is negative, showing the steady annual rate at which your investment shrank. For example, ₹1 lakh falling to ₹80,000 over 2 years is roughly a −10.6% CAGR. A negative CAGR is common for funds or stocks measured over a bad stretch.
Does CAGR account for inflation or taxes?
No. CAGR is a nominal, pre-tax figure. To find your real return, subtract inflation — with CPI around 5–6% in India, a 12% CAGR is closer to 6–7% in real terms. Capital gains tax (12.5% LTCG on equity above ₹1.25 lakh) further reduces what you actually keep, so always view CAGR as the gross headline number.
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The results shown are estimates for illustration only, based on the inputs and assumptions you provide. Actual returns, interest, and tax depend on market conditions, prevailing rates, and applicable laws, which change over time. This is not investment, tax, or financial advice — please consult a qualified advisor before making decisions.