CAGR Calculator

What This Tool Does

This calculator finds the Compounded Annual Growth Rate of an investment over a chosen time period. Enter the initial value, the final value, and the number of years, and it returns the annualised growth rate as a percentage. It works for mutual funds, stocks, business revenue, or any value that changes over time — giving you a single, comparable rate rather than a raw rupee figure.

You can also use this Sukanya Samriddhi Yojana Calculator

How It's Calculated

The CAGR formula is:

CAGR = (FV ÷ PV)^(1/n) − 1

Where:

• FV = Final Value
• PV = Present Value (initial investment or starting figure)
• n = Number of years

Multiply the result by 100 to express it as a percentage.

Worked Example:

• Initial investment: ₹1,00,000
• Final value after 5 years: ₹10,00,000
• n = 5

CAGR = (10,00,000 ÷ 1,00,000)^(1/5) − 1 = (10)^0.2 − 1 = 1.585 − 1 = 0.585 or 58.5%

This means the investment grew at an equivalent rate of 58.5% per year, compounded annually — even if the actual year-by-year returns were uneven.

What CAGR Actually Tells You

CAGR represents a smoothed annual growth rate — the constant rate that would have taken an investment from its starting value to its ending value over the given period, assuming growth compounded each year. It does not describe what actually happened year by year. It is a single summary figure that makes comparison easier.

Example of why this matters:

Two investments both start at ₹1,00,000 and end at ₹2,00,000 after 5 years. Both have the same CAGR of approximately 14.9%. But one may have grown steadily each year while the other dropped 40% in year one and then recovered sharply. The CAGR is identical — but the investor experience was very different.

This is why CAGR is useful for comparing end results but should always be read alongside other indicators when evaluating an investment's risk or consistency.

Edge Cases and Special Rules

CAGR in months: If the investment period is less than a year or involves months, convert the tenure to a decimal year (e.g. 18 months = 1.5 years) and use that in the formula. The result is still expressed as an annualised rate.

Negative growth: If the final value is less than the initial value, CAGR will be negative — correctly showing that the investment declined on an annualised basis.

CAGR does not reflect volatility: Two investments with the same CAGR can have vastly different risk profiles. A fund that returned −30%, +60%, −10%, +50%, +5% and one that returned a steady 14% annually may both have the same 5-year CAGR. CAGR alone cannot distinguish between them.

CAGR assumes reinvestment: The formula assumes that all returns are reinvested at the same rate throughout the period. In practice, dividends, withdrawals, or partial redemptions change the actual return — in these cases, CAGR is an approximation rather than a precise measure.

Starting point sensitivity: CAGR is highly sensitive to the start and end dates chosen. An investment measured from a market peak to a trough will show a very different CAGR than the same investment measured across a full cycle. Always note the time period when comparing CAGR figures.

CAGR vs. Absolute Return

Absolute return measures the total percentage gain or loss from start to finish without accounting for time.

Absolute return = (FV − PV) ÷ PV × 100

For ₹1,00,000 growing to ₹2,00,000: absolute return = 100%

But whether that happened over 2 years or 10 years makes a massive difference to investment quality. CAGR normalises for time, making it a far more meaningful comparison metric — particularly when evaluating mutual funds, stocks, or business performance across different periods.

CAGR and Lumpsum Calculator — Are They the Same?

Not exactly, but they are closely related. A lumpsum calculator uses CAGR (entered as an expected return rate) to project a future value from a known present value. A CAGR calculator works in reverse — it takes a known present value and a known final value, and calculates what the annualised growth rate must have been.

In short:

• Lumpsum calculator: known PV + assumed CAGR → projects FV
• CAGR calculator: known PV + known FV → calculates the implied CAGR

They use the same underlying formula from different directions. Many investors use the CAGR calculator to evaluate past performance, then feed that rate into a lumpsum calculator to project future scenarios.

Who Uses This

• Mutual fund investors comparing the historical CAGR of different funds before choosing where to invest
• Stock market investors calculating the annualised return on individual holdings over any period
• Business owners measuring revenue or profit growth from one year to another on a comparable basis
• Anyone evaluating SIP or lumpsum returns who wants to convert a raw gain figure into an annualised rate
• Financial analysts and students working on valuation or investment comparison problems

FAQ

How do I calculate CAGR in Excel?

Use the formula: =(FV/PV)^(1/n)-1 and format the cell as a percentage. Replace FV with the final value cell, PV with the initial value cell, and n with the number of years. This returns the CAGR directly.

Does CAGR include investment risk?

No. CAGR is a return metric only — it measures growth, not volatility or downside risk. Two investments with the same CAGR can have very different risk profiles. Use standard deviation or maximum drawdown alongside CAGR for a fuller picture.

What is a good CAGR for mutual funds?

This depends on the fund category. Equity funds have historically delivered 10–15% CAGR over long periods in India. Debt funds typically range from 6–8%. Comparing a fund's CAGR to its benchmark index over the same period is more meaningful than evaluating the number in isolation.

Can CAGR be calculated for SIP investments?

Standard CAGR applies to lumpsum investments with a single start and end value. For SIPs involving multiple installments, XIRR (Extended Internal Rate of Return) is the appropriate metric, as it accounts for the timing of each cash flow.

Is CAGR better than IRR for evaluating investments?

CAGR works well for simple lumpsum investments with one start and one end point. IRR is more appropriate when there are multiple cash flows at different times — for example, a business with annual profits, or a SIP with monthly deposits. For straightforward before-and-after comparisons, CAGR is simpler and sufficient.

A Note on Results

CAGR is a mathematical tool for comparing and summarising investment returns. It does not predict future performance, account for taxes, adjust for inflation, or reflect the risk taken to achieve those returns. Use it as one input in a broader evaluation, and consult a financial advisor before making significant investment decisions based on historical growth rates alone.