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CAGR Calculator - Compound Annual Growth Rate

Calculate the compound annual growth rate (CAGR) of your investments. Understand your investment's annualized return over any period.

Enter Investment Details

Your CAGR Results

Compound Annual Growth Rate (CAGR)
14.87%
Initial Value
₹1,00,000
Final Value
₹2,00,000
Absolute Return
₹1,00,000 (100%)
Time Period
5 Years

What is CAGR?

CAGR (Compound Annual Growth Rate) is a financial metric that measures the mean annual growth rate of an investment over a specified period of time, assuming the investment grows at a steady rate each year. Unlike absolute returns, which simply show the total percentage gain or loss, CAGR provides an annualized return figure that allows investors to compare the performance of different investments with varying time periods on a level playing field.

CAGR is one of the most widely used metrics in Indian investing — from evaluating mutual fund performance over 3, 5, or 10 years to comparing stock returns or assessing the growth of your retirement corpus. When you see a mutual fund scheme advertising "15% CAGR over 5 years," it means the fund's value grew at an average rate of 15% per year over that 5-year period, not necessarily that it grew exactly 15% each year.

CAGR Formula

The formula to calculate CAGR is:

CAGR = [(Final Value / Initial Value)1/n - 1] × 100

Where:

  • Final Value = The ending value of the investment
  • Initial Value = The beginning value of the investment
  • n = Number of years

For example, if an investment of ₹1,00,000 grows to ₹2,00,000 in 5 years, the CAGR would be [(2,00,000 / 1,00,000)1/5 - 1] × 100 = 14.87%. This means the investment grew at an average rate of 14.87% per year over the 5-year period.

CAGR vs. Absolute Returns

It's important to understand the difference between CAGR and absolute returns. Absolute return simply measures the total percentage change in your investment. For the same example above, the absolute return is 100% (₹1,00,000 gained on ₹1,00,000 invested). However, CAGR accounts for the time factor — a 100% return over 5 years is very different from a 100% return over 1 year. CAGR normalizes returns over time, making it a more meaningful metric for comparing investments held for different durations. Our calculator shows both CAGR and absolute return so you can see the full picture.

Why CAGR is Important for Indian Investors

CAGR is a critical metric for Indian investors for several reasons:

  • Comparative Analysis: CAGR allows you to compare the performance of different investments regardless of their time period. For example, you can compare the 5-year CAGR of a mutual fund with the 3-year CAGR of a direct stock holding to determine which performed better on an annualized basis.
  • Goal Planning: When planning for long-term financial goals like retirement, children's education, or buying a house, CAGR helps you estimate the rate at which your investments need to grow to reach your target corpus. If you need ₹1 crore in 15 years and have ₹20 lakhs today, you can calculate the CAGR required to get there (approximately 11.3% per year).
  • Mutual Fund Evaluation: SEBI regulations mandate that mutual funds disclose their CAGR returns across 1-year, 3-year, 5-year, and since inception periods. This standardized disclosure helps investors evaluate fund performance consistently across different Asset Management Companies (AMCs).
  • Historical Analysis: The Nifty 50 index has delivered a CAGR of approximately 14-15% since its inception in 1996, though with significant volatility along the way. Understanding long-term market CAGR helps set realistic return expectations and avoid the trap of chasing past high performers.

Limitations of CAGR

While CAGR is a useful metric, investors should be aware of its limitations:

  • Ignores Volatility: CAGR assumes steady growth each year, which rarely happens in practice. An investment may have had years with 30% gains and years with 20% losses, yet the CAGR smoothens everything to a single average number. This can mask the true risk and volatility of the investment.
  • Not a Future Predictor: Past CAGR is not a guarantee of future returns. A fund that delivered 18% CAGR over the past 5 years may deliver significantly different returns in the next 5 years due to market conditions, economic changes, or fund management changes.
  • Works Best for Single Transactions: CAGR is most accurate for a lump sum investment where you invest once and let it grow. For SIP investments where you invest regularly over time, metrics like XIRR (Extended Internal Rate of Return) are more appropriate for calculating annualized returns.
  • Limited for Negative or Zero Values: CAGR cannot be calculated meaningfully if the beginning value is zero or negative, which can be the case for certain financial instruments or capital calls.

Frequently Asked Questions About CAGR

What is a good CAGR in stock market investing?

A "good" CAGR depends on the type of investment and market conditions. For equity mutual funds in India, a CAGR of 12-15% over long-term periods (5-10 years) is considered excellent. For debt funds, 7-9% CAGR is good. Index funds tracking Nifty 50 have historically delivered 14-15% CAGR since inception. Individual stocks can have much higher or lower CAGRs. Whatever the investment, a CAGR that significantly exceeds inflation (currently 4-6% in India) is generally considered positive for wealth creation.

How is CAGR different from simple annualized return?

CAGR and annualized return are often used interchangeably, and mathematically they represent the same concept — the geometric average return per year. However, "simple annualized return" sometimes refers to the arithmetic average (total return divided by number of years), which does not account for compounding. CAGR uses the geometric average, which correctly factors in the compounding effect. Always use CAGR (geometric) rather than simple annualized return for accurate performance measurement.

Can CAGR be negative?

Yes, CAGR can be negative if the final value of the investment is less than the initial value. A negative CAGR means the investment has lost value on an annualized basis. For example, if you invested ₹1,00,000 and after 3 years the value is ₹80,000, the CAGR would be approximately -7.2% per year. Negative CAGRs typically occur during market downturns or with poorly performing investments.

What is the CAGR of Nifty 50 over the last 10 years?

The Nifty 50 has delivered a CAGR of approximately 14-15% over the last 10 years (2014-2024), though this varies depending on the exact start and end dates. Over longer periods (20+ years), the CAGR has been around 13-14%. It's important to note that these are point-to-point returns and the journey along the way has included significant corrections (e.g., COVID crash in 2020, rate hike corrections in 2022). Use our CAGR calculator above to calculate returns for any time period.

How do I calculate the CAGR of my mutual fund portfolio?

To calculate the CAGR of a lump sum mutual fund investment, simply enter the amount you initially invested (initial value), the current value of your investment (final value), and the holding period in years into our CAGR calculator above. For SIP portfolios where you invested at regular intervals, you should use XIRR (Extended Internal Rate of Return) instead of CAGR, as CAGR only works for single lump sum investments. Many mutual fund tracking platforms like Value Research, Morningstar, and Groww provide automatic XIRR calculations for your portfolio.