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CAGR Calculator

₹1K ₹1Cr
Present Value (PV) of your investment
₹1K ₹5Cr
Future Value (FV) of your investment
1 Year 30 Years
Time period in years (n)

Your Investment Results

CAGR Rate
14.87%
Total Gains
₹1,00,000
Absolute Returns
100%

What is CAGR (Compound Annual Growth Rate)?

CAGR stands for Compound Annual Growth Rate. It represents the mean annual growth rate of an investment over a specified time period longer than one year. CAGR provides a constant rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming profits were reinvested at the end of each year.

How to Calculate CAGR?

The CAGR formula smooths out the effect of volatility of periodic returns and gives you a single number that represents the average annual growth rate. Here's how CAGR is calculated:

CAGR = (FV / PV)^(1/n) - 1
Where:
FV = Future Value (Final Investment Value)
PV = Present Value (Initial Investment Value)
n = Number of years

CAGR Calculation Example

Let's understand CAGR with a simple example. Suppose you invested ₹1,00,000 in a mutual fund 5 years ago, and today its value is ₹2,00,000. Using the CAGR formula:

CAGR = (2,00,000 / 1,00,000)^(1/5) - 1 = 14.87%

This means your investment grew at an average annual rate of 14.87% over the 5-year period.

Benefits of Using CAGR Calculator

  • Performance Comparison: Compare different investments on an equal footing
  • Smooth Returns: Eliminates the effect of volatility in periodic returns
  • Future Projections: Helps estimate future investment values
  • Goal Planning: Determine required growth rate to achieve financial goals
  • Risk Assessment: Evaluate if returns justify the investment risk taken

CAGR vs Absolute Returns

While absolute returns tell you the total percentage gain over the entire period, CAGR tells you the annualized return. For long-term investments, CAGR provides a more meaningful comparison as it accounts for the time factor. For instance, a 100% return over 10 years is very different from a 100% return over 2 years.

CAGR Calculator - Frequently Asked Questions

A good CAGR depends on the investment type and market conditions. For equity investments, 12-15% CAGR is considered good, while for debt investments, 6-8% CAGR is reasonable. However, higher CAGR usually comes with higher risk.

Yes, CAGR can be negative if the final value is less than the initial investment. A negative CAGR indicates that the investment has declined in value over the specified period.

CAGR uses geometric mean and considers compounding, while average returns use arithmetic mean. CAGR provides a more accurate picture of investment performance over time as it accounts for the compounding effect.

CAGR is most useful for investments held for more than one year. For very short-term investments (less than a year), absolute returns or annualized returns might be more appropriate measures.

CAGR calculation assumes that all returns (including dividends) are reinvested. If you're calculating CAGR for stocks, include dividend reinvestment for accurate results, or use total return data.

CAGR shows historical performance and should not be used to predict future returns. Past performance doesn't guarantee future results, especially in volatile markets. Use CAGR as one of many factors in investment analysis.

For mutual funds, compare CAGR with category average and benchmark index. Large-cap funds typically show 10-12% CAGR, while small-cap funds may show 15-18% but with higher volatility. Always consider the fund's expense ratio and exit load.

CAGR calculates returns for lump sum investments, while XIRR is used for multiple cash flows like SIPs. XIRR considers the exact dates of investments and redemptions, making it more accurate for systematic investment plans.

Disclaimer: This CAGR calculator is for informational purposes only and does not constitute financial advice. Past performance does not guarantee future results. CAGR calculations assume reinvestment of all gains and do not account for taxes, fees, or market volatility. Please consult with financial advisors before making investment decisions.