What is CAGR?

CAGR (Compound Annual Growth Rate) is the average annual growth rate of an investment over a specific period, assuming it grew at a steady rate. It smooths out volatility to give a single number that represents the investment's performance.

CAGR Formula

CAGR = (Ending Value ÷ Beginning Value)^(1/Years) − 1

Result is multiplied by 100 to get percentage.

Example Calculation

Investment grew from ₹1,00,000 to ₹2,50,000 in 5 years:

• CAGR = (2,50,000 ÷ 1,00,000)^(1/5) − 1 = 20.11%
• Absolute return = 150%

Notice the difference — absolute return says 150%, but the actual annualized return is only ~20%.

Why CAGR Matters

Absolute return can be misleading. If someone says "my investment doubled", you don't know if it took 2 years or 20 years. CAGR tells you the annualized growth rate, making comparisons fair across different investments.

CAGR Use Cases

• Compare mutual funds returns
• Evaluate stock performance
• Track business revenue growth
• Measure portfolio performance
• Compare against benchmark indices

Limitations of CAGR

• Assumes steady growth — ignores volatility
• Doesn't reflect interim gains or losses
• Not suitable for SIP-based investments (use XIRR instead)

Why Use Our CAGR Calculator?

Get instant CAGR with absolute return for comparison. Perfect for evaluating mutual funds, stocks, or any investment over time.