CAGR Calculator — What is Compound Annual Growth Rate and How to Calculate It

What is CAGR? (Simple Analogy)

Imagine your investment is a plant. Some years it grows fast, some years it barely moves, maybe one year it shrinks. CAGR answers: “If this plant grew at the exact same steady rate every single year, what would that rate be?” It’s the smoothed-out, annualized growth that connects your starting point to your ending point.

🔧 Calculate instantly: CAGR Calculator — enter start value, end value, years and get CAGR with year-wise breakdown.

CAGR Formula

CAGR = (Final Value / Initial Value)^(1/Years) - 1

Variables:

• Final Value (FV) = what your investment is worth now
• Initial Value (PV) = what you originally invested
• Years (n) = holding period

Step-by-Step Worked Example

Problem: ₹1,00,000 invested in 2020. Worth ₹2,59,374 in 2030. Find CAGR.

CAGR = (2,59,374 / 1,00,000)^(1/10) - 1
     = (2.59374)^(0.1) - 1
     = 1.10 - 1
     = 0.10
     = 10% per year

Verification: ₹1,00,000 × 1.10^10 = ₹2,59,374 ✓

CAGR Reference Table (Common Scenarios)

Initial (₹)	Final (₹)	Years	CAGR
1,00,000	2,00,000	5	14.87%
1,00,000	2,00,000	7	10.41%
1,00,000	2,00,000	10	7.18%
1,00,000	3,00,000	5	24.57%
1,00,000	3,00,000	10	11.61%
1,00,000	5,00,000	10	17.46%
1,00,000	5,00,000	15	11.33%
1,00,000	10,00,000	10	25.89%
1,00,000	10,00,000	20	12.20%

Rule of 72: Money doubles in approximately 72 ÷ CAGR years. At 12% CAGR, doubling takes ~6 years.

Good CAGR Benchmarks for India

Investment Type	Expected CAGR (Long-term)
Savings Account	3-4%
Fixed Deposit	6-7%
PPF	7.1%
Corporate Bonds	8-9%
Nifty 50 Index	12-14%
Equity Mutual Fund (avg)	10-15%
Small Cap Fund (high risk)	15-20%
Gold	8-10%
Real Estate (Tier 1 cities)	6-10%

CAGR vs Absolute Return vs XIRR

Metric	Formula	Best For	Limitation
CAGR	(FV/PV)^(1/n) - 1	Lump sum, single investment	Hides volatility
Absolute Return	(FV-PV)/PV × 100	Quick profit check	Ignores time
XIRR	IRR of cash flows	SIP, multiple investments	Complex
Trailing Return	Based on specific past period	Fund comparison	Period-dependent

Key rule: Use CAGR for lump sum investments. Use XIRR for SIP or irregular investments.

When NOT to Use CAGR

1. SIP investments — multiple deposits at different times need XIRR
2. Short periods — CAGR for less than 1 year is misleading
3. Highly volatile assets — CAGR hides drawdowns (crypto may show 30% CAGR but had 80% crash in between)
4. Comparing different periods — 3-year CAGR vs 10-year CAGR aren’t directly comparable

Negative CAGR Example

₹5,00,000 invested, worth ₹3,00,000 after 4 years:

CAGR = (3,00,000 / 5,00,000)^(1/4) - 1
     = (0.6)^(0.25) - 1
     = 0.88 - 1
     = -12% per year

Your investment lost ~12% annually on a compounded basis.

Related Tools

• CAGR Calculator
• SIP Calculator
• Compound Interest Calculator

Related Articles

• SIP Calculator Guide
• PPF Calculator Guide
• Compound Interest Formula

FAQ

Q: Can CAGR be used for business revenue growth? A: Yes — CAGR is widely used to measure revenue, profit, and user base growth in business contexts. “Our revenue CAGR over 5 years is 25%” is standard startup/investor language.

Q: What is the Rule of 72? A: Divide 72 by the CAGR to estimate how many years it takes to double. At 8% CAGR → 72/8 = 9 years to double. At 15% → ~4.8 years.

Q: Is 12% CAGR good in India? A: For equity investments, 12% CAGR over 10+ years is good (matches Nifty 50 historical average). For debt instruments, 7-8% is good. Always compare against inflation (~5-6%).

Q: How do mutual fund websites show CAGR? A: They show “1Y Return,” “3Y Return,” “5Y Return” — these are all CAGR figures for that period. A “5Y Return of 15%” means the fund grew at 15% CAGR over the last 5 years.

Q: CAGR vs IRR — what’s the difference? A: CAGR assumes single investment at start. IRR (Internal Rate of Return) handles multiple cash flows at different times. For a single lump sum investment, CAGR = IRR.