CAGR — the Compound Annual Growth Rate — is the single most useful number for comparing investments. It collapses messy multi-year returns into one annualized figure you can actually reason about. This calculator takes an initial value, a final value, and a number of years, and returns the CAGR plus a year-by-year growth path that shows what steady compounding at that rate would look like.
Use it for mutual funds, stocks, real estate, business revenue, or any growth metric measured at two points in time.
What is CAGR?
CAGR is the constant annual rate that would have produced the same growth over the same period, assuming reinvestment. It is the geometric mean of yearly returns — which handles compounding correctly, unlike the arithmetic average.
CAGR is widely used because it neutralizes time. A fund that tripled over 12 years and another that tripled over 6 years are very different investments; their CAGRs (9.59% vs 20.09%) tell you so instantly, while the "200% return" headline does not.
How CAGR works
The calculator does three things:
- Divides the final value by the initial value to get the total growth ratio.
- Takes the n-th root of that ratio (where n is the number of years) to find the per-year growth factor.
- Subtracts 1 and multiplies by 100 to express the result as a percentage.
The "compound" part is automatic — each year's growth is applied to the previous year's end value, not to the original principal.
The CAGR formula
- Final Value — the value at the end of the period
- Initial Value — the value at the start
- n — the number of years
Multiply by 100 to express CAGR as a percentage.
Worked example: ₹1,50,000 → ₹3,00,000 over 5 years
- Initial value = ₹1,50,000
- Final value = ₹3,00,000
- n = 5
CAGR = 14.87% per year. Absolute return is 100%, but the annualized rate is 14.87%. If the investment ran for 10 years instead, the CAGR would have been just 7.18% — same final amount, different annualized performance.
How to use this CAGR calculator
- Enter the initial value. The amount you invested, the starting NAV, the year-1 revenue, or whatever starting metric you're measuring.
- Enter the final value. The current value or ending value of the same metric.
- Enter the duration. Whole years work best. For periods like 7.5 years, accuracy improves if you can convert to whole years or use XIRR instead.
- Read the result. The annualized growth rate plus the year-by-year growth path tells you what steady compounding at that rate would have looked like.
CAGR examples for common growth scenarios
| Initial Value | Final Value | Years | CAGR | Context |
|---|---|---|---|---|
| ₹1,00,000 | ₹1,50,000 | 5 | 8.45% | Conservative debt fund |
| ₹1,00,000 | ₹2,00,000 | 5 | 14.87% | Solid equity fund |
| ₹1,00,000 | ₹2,00,000 | 10 | 7.18% | Average mixed portfolio |
| ₹1,00,000 | ₹3,00,000 | 10 | 11.61% | Strong equity fund |
| ₹1,00,000 | ₹5,00,000 | 10 | 17.46% | Outperforming small-cap fund |
| ₹1,00,000 | ₹10,00,000 | 15 | 16.59% | Hyper-growth equity |
| ₹1,00,000 | ₹70,000 | 5 | −6.91% | Losing investment |
| ₹100 Cr | ₹500 Cr | 5 | 37.97% | SaaS revenue growth |
CAGR vs absolute return — why time matters
| Investment | Duration | Absolute Return | CAGR |
|---|---|---|---|
| ₹1L → ₹2L | 3 years | 100% | 25.99% |
| ₹1L → ₹2L | 5 years | 100% | 14.87% |
| ₹1L → ₹2L | 10 years | 100% | 7.18% |
| ₹1L → ₹2L | 20 years | 100% | 3.53% |
The same 100% absolute return ranges from excellent (26% CAGR) to terrible (3.5% CAGR — worse than a savings account) depending on the time it took. Always quote CAGR, not absolute return, when comparing investments.
CAGR vs XIRR — which to use when
| Scenario | Use CAGR | Use XIRR |
|---|---|---|
| One-time lump-sum mutual fund investment | ✓ | ✓ (same answer) |
| Monthly SIPs | ✗ | ✓ |
| Stock purchase with reinvested dividends | ✗ (use total-return CAGR) | ✓ |
| Multiple top-ups + redemptions | ✗ | ✓ |
| Revenue growth (Y1 vs Y5) | ✓ | — |
| Real estate purchase and sale | ✓ | — |
| Bond portfolio with coupons | ✗ | ✓ |
CAGR in business and finance
Beyond personal investing, CAGR is the standard metric for:
- Revenue growth. "We grew from ₹100 Cr to ₹500 Cr in 5 years" → 37.97% CAGR. Annual investor communications use this universally.
- Profit (EPS) growth. Compounding earnings per share over 5–10 years — a key valuation input.
- Customer base growth. SaaS companies report ARR CAGR; e-commerce companies report active-user CAGR.
- AUM growth for asset managers. Mutual fund houses publish AUM CAGR to demonstrate scale and momentum.
- Market sizing. Industry reports describe addressable markets as growing at "12% CAGR through 2030."
- Operating metric CAGR. Same-store sales, gross margin, employee count, R&D spending — any compounding business KPI.
Limitations of CAGR
- It assumes steady growth. A 12% CAGR can hide a year that returned +50% and a year that returned −30%. The path matters; CAGR alone doesn't show it.
- It depends on two data points. A favorable starting year and a peak ending year produce a flattering CAGR that may not be repeatable.
- It ignores volatility and drawdown. Two funds with the same CAGR can have very different risk profiles. Pair CAGR with standard deviation or maximum drawdown.
- It ignores cash flows. If you added or withdrew money during the period, CAGR will be wrong. Use XIRR.
- It can be misleading for short periods. Annualizing a 3-month 10% return into a 46% CAGR overstates reality. Only use CAGR for at least 1 full year of data.
Common CAGR mistakes
- Using CAGR for SIPs. The most common mistake. SIPs have multiple investments at different times — use XIRR.
- Cherry-picking dates. Choosing a market bottom as the starting point and a market peak as the endpoint inflates CAGR. Use rolling CAGRs over standardized windows (e.g. all 5-year periods) for a fair picture.
- Confusing CAGR with simple annual return. "Last year I earned 15%" doesn't mean CAGR is 15% — it just means one year's return was 15%.
- Ignoring dividends and distributions. Compute CAGR on Total Return NAV for funds, or include reinvested dividends, otherwise you understate growth.
- Comparing CAGRs across asset classes naively. A 9% CAGR FD and a 9% CAGR equity fund have very different risk and tax profiles. CAGR is one input, not the answer.
CAGR myths vs reality
- Myth: "Higher CAGR is always better." Reality: only after adjusting for risk. A 25% CAGR with 40% volatility may be worse than a 12% CAGR with 10% volatility, depending on your goals.
- Myth: "CAGR predicts future returns." Reality: CAGR is purely historical. Mean reversion suggests that exceptional past CAGRs often don't repeat.
- Myth: "If a fund shows 15% CAGR, I'll earn 15% per year." Reality: CAGR is the average annualized rate; actual yearly returns will vary widely around that average.
Tips for using CAGR well
- Use rolling windows. Compare 5-year CAGR across multiple start years to avoid endpoint bias.
- Pair with standard deviation. CAGR tells you the destination; standard deviation tells you the ride.
- Use XIRR for portfolios with multiple cash flows.
- Always compare CAGR to a benchmark. A 14% CAGR is great if the Nifty did 9%, but ordinary if it did 16%.
- Use Total Return CAGR for stocks and funds that pay dividends — otherwise you understate true growth.
Related calculators
- Compound Interest Calculator — the forward version of CAGR.
- SIP Calculator — for recurring monthly investments where XIRR matters.
- Lumpsum Calculator — project future value from initial investment + CAGR.
- FD Calculator — fixed-return CAGR for bank deposits.
- Inflation Calculator — convert nominal CAGR into real (post-inflation) CAGR.
- CPA Calculator — measure customer acquisition cost over time.
- Payback Period Calculator — for project investment analysis.
The bottom line
CAGR is the lingua franca of investment performance. It lets you compare a 3-year stock pick, an 11-year mutual fund, and a 20-year real estate holding on a single, fair scale. Use it for lump-sum investments and business growth — but reach for XIRR whenever multiple cash flows are involved. And always remember: a CAGR is one data point. The full picture also needs volatility, drawdown, and a sanity check against the relevant benchmark.