CAGR Calculator
Find the smooth annual rate that connects a starting value to an ending value, so investments held over different periods can be compared fairly.
The lens reconstructs a constant compounded path and compares it with your optional benchmark.
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Only the beginning value, ending value and time are used. The same CAGR can come from a calm path or severe interim losses. CAGR also ignores SIP instalments, withdrawals, dividends, tax, costs and cash-flow timing; use XIRR when intermediate cash flows exist.
Measurement tool only. Compare like-for-like periods and assets, and review volatility, risk and taxes before judging performance.
What CAGR measures
Compound Annual Growth Rate answers a deceptively simple question: if an investment had grown at exactly the same rate every year, what rate would that have been?
It is the smoothed annual rate that connects a starting value to an ending value. Real investments never grow smoothly, which is exactly why CAGR is useful — it strips out the year-to-year noise so two investments over different periods can be compared on the same basis.
The formula
CAGR = [ (Ending value ÷ Beginning value) ^ (1 ÷ Number of years) ] − 1
Multiply by 100 for a percentage.
A worked example
An investment grows from ₹1,00,000 to ₹2,50,000 over 7 years:
- Ratio: 2,50,000 ÷ 1,00,000 = 2.5
- Raise to the power of 1/7: 2.5^0.1429 = 1.1399
- Subtract 1: 0.1399
- CAGR: 13.99%
The investment grew 150% in total, but at a compound annual rate of about 14%.
Why CAGR is not the same as average return
This is where most people go wrong, and it matters.
Suppose an investment gains 50% in year one and loses 50% in year two. The simple average is 0%. But ₹1,00,000 becomes ₹1,50,000, then falls to ₹75,000. The actual CAGR is −13.4%.
Averages ignore the base each percentage applies to. CAGR does not. When comparing investments, CAGR is the honest number and the simple average is often flattering.
The rule of 72
A useful shortcut: divide 72 by the CAGR to approximate how many years an investment takes to double.
At 12%, that is 72 ÷ 12 = 6 years. At 8%, nine years. At 15%, a little under five. The calculator above gives the precise figure; the rule of 72 is close enough for mental arithmetic.
What CAGR does not tell you
- The path. Two investments with identical CAGR may have had wildly different journeys. One may have been steady; the other may have halved before recovering. If you would have sold during the drawdown, the CAGR you would actually have earned is irrelevant.
- Additional contributions. CAGR assumes a single lump sum. If you added money along the way, use XIRR instead.
- Dividends, unless you include them in the ending value.
- Risk. A 14% CAGR from a fixed deposit and a 14% CAGR from a small-cap fund are not the same achievement.
Related: SIP Calculator · Stock Return Calculator
Frequently asked questions
Can CAGR be negative?
Yes. If the ending value is lower than the beginning value, CAGR is negative. Rs 2,00,000 falling to Rs 1,60,000 over three years gives a CAGR of about minus 7.17%.
What is a good CAGR?
There is no universal answer, and any figure quoted as a target should be treated with suspicion. What matters is CAGR relative to inflation, relative to a comparable benchmark, and relative to the risk taken to achieve it.
Should I use CAGR or absolute return?
Absolute return for a single holding period. CAGR when comparing investments held over different time spans, because it puts everything on the same annual footing.
Does CAGR work for SIP investments?
Not properly. Because SIP instalments are invested at different times, each has a different holding period. XIRR handles this correctly; CAGR does not.