CAGR (Compound Annual Growth Rate) is the standard metric for measuring investment performance over time. It represents the smoothed annual growth rate that takes an investment from its beginning value to its ending value over a specific period. CAGR is the most meaningful way to compare returns across different investments and time periods.
What Is a CAGR Calculator?
A CAGR calculator computes the Compound Annual Growth Rate of any investment given the initial value, final value, and investment period.
It can also work in reverse given a starting value, target CAGR, and number of years, it projects the future value.
CAGR is used to compare returns on stocks, mutual funds, real estate, business revenues, and any other metric that grows over multiple years.
CAGR Formula
CAGR = [(Ending Value / Beginning Value)^(1/Years) − 1] × 100.Example: ₹1 lakh grew to ₹2.5 lakh in 7 years.
CAGR = (2.5)^(1/7) − 1 = 14.07%.Note that CAGR is a smoothed rate the actual year-by-year returns could vary wildly.
A stock that went up 100%, down 50%, and up 100% over 3 years has a CAGR of 0% on ₹1 lakh it ends at exactly ₹1 lakh.
Example CAGR Calculations
CAGR = (95/25)^(1/10) − 1 = 14.29% p.a.CAGR = (58/35)^(1/5) − 1 = 10.67% p.a.CAGR = (150/50)^(1/5) − 1 = 24.57% p.a.Mutual fund: NAV grew from ₹25 to ₹95 in 10 years. Real estate: Bought at ₹35 lakh in 2019, sold at ₹58 lakh in 2024 (5 years). Business revenue: ₹50L in 2020 grew to ₹1.5 crore in 2025 (5 years). Benchmark comparison: Nifty 50 10-year CAGR ≈ 13.5%. Your fund's 14.29% CAGR means it outperformed the index.
CAGR vs Absolute Return vs XIRR
Absolute Return = (Ending Value − Starting Value) / Starting Value × 100.It ignores time.
CAGR annualises the return for fair cross-period comparison.
XIRR (Extended IRR) is used for SIP investments with multiple, irregular cash flows it gives each instalment a different time-weighting.
For a single lumpsum investment, CAGR and XIRR give the same answer.
For SIPs, always use XIRR.
Benchmark CAGR Returns in India
Sensex 20-year CAGR (2004–2024): ~14%.
Nifty 50 20-year CAGR: ~13.5%.
Indian real estate (metro cities, 10-year): 6–10%.
Gold (10-year): ~10%.
FD (10-year average): ~6.5%.
PPF: 7.1% (guaranteed).
Equity mutual funds (large-cap, 10-year average): 12–14% CAGR.
Always compare your investment's CAGR against these benchmarks to assess whether you are generating alpha.
Tips for Using CAGR Effectively
- Compare CAGR over same time periods a fund's 1-year CAGR vs another fund's 5-year CAGR tells you nothing useful.
- Use 5-year and 10-year CAGRs for fund evaluation short-term CAGRs are distorted by market cycles.
- Look for consistency a fund with 12% CAGR for 10 consecutive years is far better than one with 14% CAGR driven by two exceptional years.
- For business analysis, compare revenue CAGR to profit CAGR widening gap indicates margin compression.
Steps to Use the CAGR Calculator
- Enter Initial Investment Value Specify the value based on your financial estimates or requirements.
- Enter Maturity / Final Value Specify the value based on your financial estimates or requirements.
- Choose Time Period (Years) Specify the value based on your financial estimates or requirements.
- View Results Review the instant breakdown of calculations, interest splits, or final wealth estimates dynamically displayed.
Advantages of Using the CAGR Calculator
- Performance Smoothing Find the average annualised return rate of investments over time.
- Asset Comparisons Compare equity, gold, FD, and mutual fund performances on an equal footing.
- Accurate Growth Metrics Avoid absolute return distortions that ignore the investment duration.
- Corporate Finance Tracking Compute annualised growth rates for business sales and earnings.
Frequently Asked Questions
What is a good CAGR for an investment?
A CAGR above India's long-term inflation rate (~6%) creates real wealth. A CAGR above the Nifty 50 benchmark (~13%) indicates alpha generation. For FDs and debt instruments, 6.5–8% CAGR is reasonable. For equity, 12–15% is considered good over a 10-year period.
Can CAGR be negative?
Yes. If the ending value is less than the beginning value (the investment lost money), CAGR will be negative. A stock bought at ₹500 that fell to ₹300 over 3 years has a CAGR of −15.9%.
How is CAGR different from IRR?
CAGR applies to a single lumpsum investment with one initial and one final value. IRR (Internal Rate of Return) works for investments with multiple cash flows over time, such as SIPs, rental properties, or business projects. For SIPs, use XIRR instead of CAGR.
What is rolling CAGR and why does it matter?
Rolling CAGR measures the CAGR over a specific period (e.g., 5 years) starting from every possible date giving hundreds of CAGR data points instead of just one. A fund with consistently positive rolling 5-year CAGR in all periods is far more reliable than one with a high point-to-point CAGR from a lucky start date. Always check rolling returns when evaluating mutual funds.
Can I use CAGR to project future investment value?
Yes. Future Value = Present Value × (1 + CAGR)^Years. If you expect 12% CAGR on a ₹10 lakh investment over 15 years: FV = 10,00,000 × (1.12)^15 = ₹54.74 lakh. This is a projection, not a guarantee actual returns will deviate year-to-year.
Is mutual fund star rating based on CAGR?
No. Mutual fund star ratings (by agencies like Value Research or Morningstar) are risk-adjusted they factor in return, risk (standard deviation), and consistency. A fund with slightly lower CAGR but much lower volatility can be rated higher than a high-CAGR, high-volatility fund.
Is CAGR the same as average annual return?
No, CAGR annualises compound growth, accounting for volatility, whereas average return is a simple arithmetic average.
Can I calculate CAGR for a period under one year?
CAGR is designed for multi-year periods. For periods under one year, absolute return or annualized absolute return is preferred.