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CAGR Calculator

Calculate the Compound Annual Growth Rate of your investments.

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CAGR Results

Enter your investment details to calculate CAGR.

Mastering CAGR (Compound Annual Growth Rate): A Complete Guide

CAGR is the mean annual growth rate of an investment over a specified period longer than one year. It represents what your investment would grow at each year if profits were reinvested. CAGR smooths out market volatility to show consistent annual growth.

Accurate Measurement

CAGR shows the real annual growth rate, not absolute returns. It allows fair comparison of investments across different time periods and market conditions.

Smooths Volatility

CAGR removes the impact of yearly ups and downs, showing a consistent growth pattern. This helps you understand your investment's true performance trajectory.

Performance Comparison

Compare different mutual funds, stocks, or investments fairly. CAGR normalizes returns to an annual basis, making it easy to identify which investments performed better.

Future Planning

Use historical CAGR to project future investment values. This helps in retirement planning and setting realistic financial goals for your investments.

CAGR vs Other Return Measures

Return Type Definition Time Period Use Case
CAGR Annualized compound growth rate Multi-year only Comparing long-term investments
Absolute Return Total % change from start to end Any period Quick understanding of profit/loss
Simple Return Annual return without reinvestment 1 year Fixed deposit and bond returns
YoY Return Year-to-year performance Yearly Tracking annual mutual fund performance

Real-World CAGR Examples

Example 1: Mutual Fund Investment

Scenario: You invest ₹5,00,000 in a large-cap mutual fund

After 10 Years: Your investment grows to ₹12,50,000

Absolute Return: 150% (or 2.5x your investment)

CAGR: 9.6% per year

Example 2: Stock Investment

Scenario: You buy a stock at ₹1,00,000

After 5 Years: Stock value becomes ₹1,50,000

Absolute Return: 50%

CAGR: 8.45% per year

Example 3: Investment Comparison
Investment Type Initial Amount Final Amount Duration Absolute Return CAGR
Equity Fund ₹2,00,000 ₹4,50,000 10 years 125% 8.5%
Fixed Deposit ₹2,00,000 ₹3,45,000 10 years 72.5% 5.6%
Difference - ₹1,05,000 Same 52.5% 2.9%

The equity fund significantly outperforms FD, delivering 2.9% higher CAGR, resulting in ₹1,05,000 more wealth over 10 years.

CAGR Formula & Calculation

CAGR Formula

CAGR = (Ending Value ÷ Beginning Value)1/n - 1

Where n = number of years

Step-by-Step Calculation Example

Given:

  • Beginning Value = ₹1,00,000
  • Ending Value = ₹1,46,410
  • Duration = 5 years

Calculation:

  1. Divide Ending by Beginning: 1,46,410 ÷ 1,00,000 = 1.4641
  2. Take 1/n power: 1.4641 ^ (1/5) = 1.4641 ^ 0.2 = 1.08
  3. Subtract 1: 1.08 - 1 = 0.08
  4. Convert to percentage: 0.08 × 100 = 8%

Result: Your investment grew at 8% CAGR over 5 years

Frequently Asked Questions

CAGR is the mean annual growth rate of an investment over a specified period longer than one year. It represents the rate at which an investment grows each year if the profits were reinvested at the end of each year. CAGR smooths out volatility and shows the consistent annual growth rate of your investment, making it a better metric than absolute returns for comparing different investments.

CAGR is calculated using the formula: CAGR = (Ending Value / Beginning Value)^(1/Number of Years) - 1. For example, if you invest ₹1,00,000 and it becomes ₹1,46,410 in 5 years, the CAGR would be 8% annually. The formula shows how much your investment grows each year on average, assuming profits are reinvested.

Absolute return is the total percentage change from start to end, regardless of time period. CAGR annualizes this return, showing yearly growth. Example: ₹1 lakh becomes ₹1.5 lakhs in 3 years = 50% absolute return, but only 14.47% CAGR. CAGR is more meaningful for comparing investments across different time periods because it accounts for the time factor.

CAGR is important because: (1) It smooths volatility and shows consistent growth, (2) It allows fair comparison of investments with different time periods, (3) It helps determine if your investment beats inflation and benchmarks, (4) It projects future values based on historical growth rates, (5) It removes the impact of market timing from performance evaluation. These features make it invaluable for investment decision-making.

Expected CAGR depends on fund type and market conditions: Large-cap equity funds: 10-12% CAGR, Mid-cap funds: 12-15% CAGR, Small-cap funds: 15-20% CAGR, Balanced funds: 8-10% CAGR, Debt funds: 5-7% CAGR. Historical returns suggest equity funds average 10-12% CAGR over 10+ year periods, while debt funds average 6-8%. Always consider your risk tolerance and investment horizon when evaluating fund performance.

Yes, CAGR can be negative when your ending value is less than your beginning value, indicating a loss. For example, if you invested ₹1,00,000 and it decreased to ₹80,000 in 3 years, your CAGR would be -6.92%, meaning you lost approximately 6.92% annually. Negative CAGR indicates that your investment declined over the period. This is useful for understanding the magnitude and rate of losses.

Simple Interest calculates returns only on the principal amount. Compound Interest (CI) includes returns on both principal and accumulated interest. CAGR is similar to compound interest as it assumes profits were reinvested annually. Example with ₹1 lakh at 10% for 3 years: Simple Interest = ₹1,30,000, Compound Interest/CAGR = ₹1,33,100. CAGR is the annualized version of compound returns, making it ideal for comparing investments across different time periods.

Use CAGR for investment planning by: (1) Analyzing historical fund performance to understand expected returns, (2) Projecting future values using the formula: Future Value = Present Value × (1 + CAGR)^Years, (3) Comparing different investment options to choose the best performer, (4) Setting realistic return targets based on asset class CAGR, (5) Monitoring if your current returns match or exceed expected CAGR for your fund type. This helps create realistic financial projections and goals.
CAGR Calculation Tips
  • Use CAGR to compare mutual funds fairly across different time periods
  • Compare fund CAGR with benchmark index CAGR to measure outperformance
  • Use 10+ year CAGR for equity funds to smooth market cycles
  • Check if fund CAGR beats inflation (3-4%) for real wealth creation
  • Negative CAGR doesn't always mean bad investment; check time period
  • Project future values: FV = PV × (1 + CAGR)^Years
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Important Disclaimer
This CAGR calculator is for educational purposes only. Results are estimates based on the values you provide. Past performance does not guarantee future returns. CAGR is a historical metric and should not be the only factor in investment decisions. Always consult with a qualified financial advisor before making investment decisions based on CAGR analysis.