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CAGR Calculator

Calculate compound annual growth rate, total growth, and absolute profit — free, instant, no signup required.

CAGR Calculator
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What is CAGR?

CAGR stands for Compound Annual Growth Rate. It is the rate at which an investment would have grown if it had grown at a steady rate annually, compounded over the investment period. CAGR is often described as a "smoothed" growth rate because it accounts for compounding and eliminates the volatility of year-to-year returns.

CAGR is one of the most important metrics used in finance, business, and investing. Fund managers, stock analysts, and personal finance experts all rely on CAGR to communicate investment performance because it provides a single, clean number that represents how fast something has grown — regardless of interim ups and downs. This calculator lets you compute CAGR instantly for any investment by entering the initial value, final value, and number of years.

CAGR Calculation Formula

The formula for CAGR is:

CAGR (%) = ((Final Value / Initial Value)^(1 / Years) − 1) × 100

Where:
  Final Value = The value of the investment at the end of the period
  Initial Value = The value of the investment at the start
  Years = The number of years over which growth occurred

For example, if an investment grew from ₹1,00,000 to ₹2,00,000 over 5 years, the CAGR = (2,00,000/1,00,000)^(1/5) − 1 = 2^0.2 − 1 = 14.87% per year.

CAGR vs Absolute Returns

Absolute returns tell you the total percentage gain from start to finish, without considering how many years the investment was held. For example, an investment that doubled in value has an absolute return of 100%. But was that over 3 years or 30 years? The answer makes a huge difference.

CAGR puts time into the equation. The same 100% absolute return translates to a 26% CAGR over 3 years, but only 2.4% CAGR over 30 years. This is why CAGR is the standard metric for comparing mutual fund performance, stock returns, and business growth rates across different time horizons.

How to Interpret CAGR

CAGR represents a hypothetical steady annual growth rate. Keep these key points in mind when interpreting it:

  • It is not the actual year-by-year return: An investment might have returned 40% one year, -10% the next, and 20% the year after, but its CAGR over three years would still represent the smooth equivalent rate.
  • Higher is not always better: Higher CAGR investments often come with higher risk. Always consider the risk taken to achieve a given CAGR.
  • Context matters: A 15% CAGR for a large-cap equity fund over 10 years is excellent. The same 15% CAGR for a startup business over 3 years may be considered modest for the risk involved.
  • Compare apples to apples: When comparing two investments using CAGR, ensure both use the same time period and include the same types of returns (dividends, interest, etc.).

When to Use CAGR

  • Evaluating mutual fund performance: All fund factsheets in India show 1-year, 3-year, and 5-year CAGR returns — these are the standard benchmarks for comparison.
  • Comparing stock investments: Use CAGR to compare how two stocks or portfolios have grown over the same period.
  • Tracking business growth: Revenue, profit, and customer growth are often reported as CAGR to show the company's trajectory.
  • Setting investment goals: If you want ₹1 crore in 10 years starting with ₹20 lakh, calculate the CAGR needed and identify asset classes likely to deliver it.
  • Real estate evaluation: Calculate the CAGR of a property's appreciation to compare it with other investment options.

Advantages of Using an Online CAGR Calculator

  • Instant calculation: CAGR involves an exponent (^1/n) that is tedious to compute manually. This calculator gives you the answer instantly.
  • All three metrics together: Get CAGR, total growth percentage, and absolute profit in rupees all at once, giving you the complete picture.
  • Scenario comparison: Adjust the sliders to compare different initial values, final values, or durations and see how CAGR changes.
  • Visual chart: The doughnut chart shows the split between your initial investment and growth, making it easy to visualize the profit component.
  • Free and private: No signup, no data sent to servers — all calculations happen locally in your browser.

Frequently Asked Questions

Yes, CAGR and annualized return are mathematically the same when calculated using beginning and ending values over a time period. Both represent the constant annual rate of return that would have taken an investment from its initial value to its final value, assuming compounding. However, some financial products use "average annual return" which is a simple arithmetic mean of year-by-year returns — this is different from and generally higher than CAGR. Always check whether a quoted figure is CAGR (geometric mean) or average annual return (arithmetic mean) to avoid misinterpretation.
For large-cap equity mutual funds in India, a CAGR of 12–15% over a 5–10 year period is generally considered good. Mid-cap and small-cap funds may offer 15–20% CAGR over long durations but with significantly higher volatility and risk. For debt funds, 6–8% CAGR is typical. Balanced or hybrid funds tend to fall between 10–13%. Any fund that consistently beats its benchmark index over multiple 5-year rolling periods with a CAGR of 2–3% above the benchmark is considered an outperformer. Always compare a fund's CAGR against its category average, not just in isolation.
CAGR has several important limitations. First, it only looks at the start and end values — it completely ignores the path taken, so two investments with the same CAGR might have had very different volatility profiles. Second, it assumes reinvestment of all returns, which may not be realistic for dividend-paying stocks or rental income from real estate. Third, it cannot handle investments with multiple cash flows (like SIPs or regular withdrawals) — for those, XIRR is the appropriate metric. Fourth, past CAGR provides no guarantee of future performance. Use CAGR as one input among many when evaluating investments, not as the sole decision criterion.
Yes, CAGR can be negative if the final value is less than the initial value — meaning the investment lost money over the period. For example, if ₹1,00,000 invested in a stock is worth only ₹70,000 after 5 years, the CAGR is (0.7)^(1/5) − 1 = approximately -6.9% per year. A negative CAGR clearly signals underperformance. When evaluating an investment with a negative CAGR, always consider whether the loss was due to sector-specific issues, broader market conditions, or fundamental problems with the investment — the context matters for deciding whether to continue holding or exit.