CAGR Calculator

What Is CAGR?

CAGR (Compound Annual Growth Rate) represents the rate at which an investment would have grown if it had grown at a steady rate every year. It's the most common way to compare the performance of different investments over different time periods.

CAGR Formula

The formula is:

• CAGR = (Ending Value / Beginning Value)^1/n − 1

Where n = Number of years.

Worked Example

If you invested ₹5,00,000 and it grew to ₹12,00,000 in 7 years:
CAGR = (12,00,000 / 5,00,000)^1/7 − 1 = 13.31%
This means your investment grew at an equivalent steady rate of 13.31% per year, even if actual yearly returns varied wildly.

CAGR vs Absolute Returns

Absolute return tells you the total gain — in the example above, it's 140%. But that number is meaningless without knowing the time period. CAGR normalises returns to a per-year basis, making it easy to compare a 3-year FD with a 10-year equity investment.

When to Use CAGR (and When Not To)

• Use CAGR for lump-sum investments — comparing mutual fund performance, stock returns, real estate appreciation, or gold price growth
• Don't use CAGR for SIP or staggered investments — use XIRR instead, which accounts for the timing of each cash flow
• Be cautious with short periods — a 1-year CAGR is just the annual return and can be misleading if that year was unusually good or bad

Limitations of CAGR

CAGR smooths out all volatility, which can mask risk. Two investments may have the same CAGR but very different risk profiles. An investment that returns +50%, −30%, +40% feels very different from one that returns +15%, +14%, +16%, even if the CAGR is similar. Always consider CAGR alongside standard deviation or maximum drawdown for a complete picture.