CAGR Calculator

What is CAGR?

CAGR stands for Compound Annual Growth Rate. It measures the mean annual growth rate of an investment over a specified time period longer than one year. CAGR is one of the most accurate ways to calculate the return on an investment that rises and falls in value over time. It smooths out the volatility and gives you a single annualised growth rate, making it easy to compare different investments.

CAGR Formula

The formula for CAGR is: CAGR = (Ending Value / Beginning Value)^1/n − 1, where n is the number of years. The result is expressed as a percentage. For example, if you invested ₹1,00,000 and it grew to ₹2,00,000 in 5 years, the CAGR would be (2,00,000/1,00,000)^(1/5) - 1 = 14.87%.

How to Use This Calculator

1. Enter the beginning value of your investment.

2. Enter the ending (current or final) value of your investment.

3. Enter the time period in years.

4. Click "Calculate CAGR" to see the compound annual growth rate, absolute growth and total growth percentage.

CAGR vs Average Annual Return

Average annual return is a simple arithmetic mean of yearly returns, while CAGR accounts for the compounding effect. CAGR gives you the rate at which the investment would have grown if it grew at a steady rate every year. For volatile investments like stocks and mutual funds, CAGR provides a more realistic picture of actual performance than simple average returns.

Frequently Asked Questions

Where is CAGR used?

CAGR is widely used to evaluate the performance of mutual funds, stocks, real estate, and business revenue over time. In India, CAGR is the standard metric used by mutual fund companies to report long-term fund performance.

What is a good CAGR?

A good CAGR depends on the type of investment. For equity mutual funds in India, a CAGR of 12-15% over 5+ years is considered good. For fixed income instruments, 6-8% CAGR is typical. Real estate in India has historically delivered 8-12% CAGR in metro cities.

Does CAGR account for interim cash flows?

No, CAGR only considers the beginning and ending values. It does not account for additional investments or withdrawals made during the period. For investments with periodic cash flows (like SIPs), XIRR is a more appropriate measure.