CAGR Calculator

A CAGR (Compound Annual Growth Rate) Calculator is a financial tool that measures the average annual growth rate of an investment over a specified period, assuming the growth compounds steadily each year. It provides a single percentage figure that represents the smoothed annual return, making it easier to compare different investments. CAGR is widely used in India for evaluating mutual fund performance, stock returns, revenue growth of companies, and any investment where values change over multiple years. It eliminates the noise of year-on-year volatility and gives a clear picture of long-term growth.

The CAGR formula is: CAGR = (Ending Value / Beginning Value)^(1 / Number of Years) - 1, expressed as a percentage. For example, if you invested ₹1,00,000 in a mutual fund and it grew to ₹2,50,000 in 5 years, the CAGR = (2,50,000 / 1,00,000)^(1/5) - 1 = (2.5)^0.2 - 1 = 0.2011 or 20.11%. This means your investment grew at an average rate of 20.11% per year over 5 years. This calculator automates the computation — simply enter the beginning value, ending value, and time period to get instant results.

Absolute return measures the total percentage gain or loss on an investment without considering the time period, calculated as: Absolute Return = (Ending Value - Beginning Value) / Beginning Value × 100. For example, if ₹1 lakh becomes ₹2 lakh, the absolute return is 100%, whether it took 1 year or 10 years. CAGR, on the other hand, annualizes the return, providing the yearly growth rate. The same ₹1 lakh growing to ₹2 lakh in 10 years gives a CAGR of only 7.18%. CAGR is a far more meaningful metric for comparing investments held over different time periods, as it accounts for the time value of money.

CAGR is the standard metric used by SEBI, AMFI, and mutual fund platforms in India to report fund performance over 1-year, 3-year, 5-year, and since-inception periods. When comparing two mutual funds — say Fund A with a 5-year CAGR of 15% and Fund B with 12% — Fund A has delivered better annualized returns. However, CAGR should not be used in isolation; always check the fund's consistency, risk (standard deviation), and downside performance. Use this CAGR Calculator to compare mutual funds, SIP returns, NPS returns, and other long-term investments side by side.

Yes, CAGR can be negative, which indicates that the investment has lost value over the period. A negative CAGR means the ending value is less than the beginning value. For example, if you invested ₹5,00,000 and it declined to ₹3,50,000 over 3 years, the CAGR = (3,50,000 / 5,00,000)^(1/3) - 1 = -11.19% per year. A negative CAGR is commonly seen in underperforming stocks, sector-specific funds during downturns, or poor business revenue performance. It signals that the investment destroyed value over the measured period.

While CAGR is a powerful metric, it has limitations: (1) It assumes steady growth, ignoring volatility — two investments with the same CAGR may have vastly different risk profiles; (2) It does not reflect interim highs or lows, which can be critical for risk assessment; (3) CAGR is sensitive to the start and end dates chosen — picking a market high as the start and a low as the end will show poor CAGR, and vice versa; (4) It does not account for additional investments or withdrawals during the period. For investments with irregular cash flows, use XIRR (Extended Internal Rate of Return) instead of CAGR for more accurate measurement.

CAGR works for lump sum investments with a single beginning and ending value, while XIRR (Extended Internal Rate of Return) is designed for investments with multiple cash flows at irregular intervals, such as SIPs. For example, if you invest ₹10,000 monthly via SIP for 5 years, CAGR cannot accurately measure returns because each installment has a different holding period. XIRR calculates the annualized return by considering each cash flow's exact date, giving a precise measure of SIP performance. Most mutual fund platforms in India display XIRR for SIP investments and CAGR for point-to-point returns.