CAGR Calculator

What is a CAGR Calculator?

A CAGR (Compound Annual Growth Rate) Calculator measures the mean annual growth rate of an investment over a specified period longer than one year. It represents the rate at which an investment would have grown if it had grown at a steady rate each year, compounding annually. CAGR smooths out the volatility of periodic returns, providing a clearer picture of an investment's performance over time. For investments that involve regular contributions or reinvested dividends, the Compound Interest Calculator shows how your savings can grow with the power of compounding.

How Does the CAGR Calculator Work?

The CAGR formula is: CAGR = (Final Value / Initial Value)^(1 / Number of Years) - 1. The result is expressed as a percentage. For example, if you invested Rs 1,00,000 and it grew to Rs 2,00,000 over 5 years, the CAGR would be (200000/100000)^(1/5) - 1 = 0.1487 or 14.87%. This means your investment grew at an average rate of 14.87% per year, compounded annually.

How to Use This CAGR Calculator

Enter Initial Investment: The amount you originally invested.
Enter Final Value: The current value of your investment or the amount you redeemed.
Select Time Period: Either enter the number of years directly, or use the date picker to select start and end dates.
View Results: The calculator shows the CAGR percentage, total return, absolute gain/loss, and the wealth multiplier.

CAGR vs Absolute Return

Absolute return shows the total percentage gain or loss without considering the time factor. For instance, a 50% return over 1 year is excellent, but the same 50% return over 10 years is below average. CAGR accounts for the time period, making it a more accurate measure of investment performance. CAGR is the preferred metric for comparing investments with different time horizons. To evaluate the profitability of an investment relative to its cost, use the ROI Calculator.

Limitations of CAGR

CAGR assumes steady, smooth growth, which rarely happens in real markets. It does not reflect investment risk or volatility. An investment with a high CAGR might have experienced severe drawdowns along the way. CAGR also does not account for additional investments or withdrawals during the period. For investments with multiple cash flows, XIRR is a more appropriate metric — our IRR Calculator handles irregular cash flow analysis with ease.

Frequently Asked Questions

What is a good CAGR for investments in India?

A good CAGR depends on the asset class and time period. Historical Nifty 50 returns have averaged around 12-15% CAGR over long periods. Good mutual funds may deliver 15-18% CAGR over 5-10 years. Fixed deposits typically offer 5-8% CAGR. Any CAGR that beats inflation (currently 4-6% in India) by a meaningful margin is considered good.

What is the difference between CAGR and IRR?

CAGR assumes a single lump sum investment and a single final value, with no intermediate cash flows. IRR (Internal Rate of Return) can handle multiple cash flows at regular intervals. XIRR extends IRR to handle cash flows at irregular intervals. For SIP investments or portfolios with additional purchases and withdrawals, XIRR is the correct metric, not CAGR.

Can CAGR be negative?

Yes, CAGR can be negative if the final value is less than the initial investment. A negative CAGR indicates the investment has lost value over the period. For example, if you invested Rs 1,00,000 and it is now worth Rs 80,000 after 3 years, the CAGR would be approximately -7.2%.

How is CAGR different from annualized return?

CAGR and annualized return are essentially the same concept. Both express the geometric average annual rate of return over a period. The term "CAGR" is more commonly used in the context of business and investment growth, while "annualized return" is more commonly used for mutual funds and portfolio performance reporting.

Does CAGR include dividends and interest?

CAGR only measures the growth in the value of the investment itself. If you want to include dividends, interest, or other distributions, you need to add them back to the final value before calculating CAGR. This is often called "total return CAGR" and gives a more complete picture of investment performance.

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