CAGR Calculator — Compound Annual Growth Rate Formula and Examples

What is CAGR?

If your investment grew from ₹1 lakh to ₹2.5 lakhs in 5 years, what was the annual growth rate? You can’t just divide 150% by 5 and say 30% — because growth compounds. CAGR gives you the true annualized return that accounts for compounding.

🔧 Calculate now: Compound Interest Calculator — compute compound growth with multiple frequencies and year-wise breakdown.

CAGR (Compound Annual Growth Rate) is the constant annual rate at which an investment would have grown from its starting value to its ending value, assuming profits were reinvested each year.

CAGR Formula

CAGR = (End Value / Start Value)^(1/Years) - 1

Or equivalently:

CAGR = [(FV/PV)^(1/n)] - 1

Where:

• FV = Final Value
• PV = Present (Starting) Value
• n = Number of years

Worked Example

Investment: ₹1,00,000 invested in a mutual fund After 5 years: Value is ₹1,61,051

CAGR = (1,61,051 / 1,00,000)^(1/5) - 1
     = (1.61051)^(0.2) - 1
     = 1.10 - 1
     = 0.10 = 10%

CAGR = 10% per year

This means the investment grew at an equivalent steady rate of 10% compounded annually — even if actual yearly returns varied wildly (maybe +25% one year, -5% the next).

CAGR vs Absolute Returns

Investment	Start Value	End Value	Years	Absolute Return	CAGR
Equity Mutual Fund	₹1,00,000	₹2,50,000	5	150%	20.1%
Fixed Deposit	₹1,00,000	₹1,40,255	5	40.3%	6.96%
Gold	₹1,00,000	₹1,80,000	5	80%	12.4%
Real Estate	₹10,00,000	₹18,00,000	7	80%	8.78%
SIP Portfolio	₹6,00,000	₹9,30,000	5	55%	9.16%

Key insight: Gold and real estate both gave 80% absolute returns, but gold did it in 5 years (12.4% CAGR) while real estate took 7 years (8.78% CAGR). CAGR normalizes for time.

Quick CAGR Reference Table

Years	Doubling CAGR	Tripling CAGR	5x CAGR
3	26.0%	44.2%	71.0%
5	14.9%	24.6%	38.0%
7	10.4%	17.0%	25.8%
10	7.2%	11.6%	17.5%
15	4.7%	7.6%	11.3%
20	3.5%	5.6%	8.4%

Rule of 72: To estimate doubling time, divide 72 by the CAGR. At 12% CAGR, money doubles in ~6 years.

When to Use CAGR

• Comparing mutual fund performance across different time periods
• Evaluating business revenue growth
• Setting realistic investment goals
• Comparing asset classes (equity vs debt vs gold)

CAGR Limitations

1. Hides volatility — 10% CAGR could mean steady 10% each year OR +40%, -20%, +25%, -5%, +15%
2. Doesn’t work for SIP — use XIRR for regular investments
3. Assumes reinvestment — dividends/interest must be reinvested
4. Point-to-point — sensitive to start and end dates

CAGR vs Other Metrics

Metric	Best For	Limitation
CAGR	Lump sum growth over time	Hides volatility
XIRR	SIP/irregular cash flows	More complex
Absolute Return	Quick profit check	Ignores time
Annualized Return	Short-term performance	May mislead for less than 1 year

Related Tools

• Compound Interest Calculator
• Percentage Calculator
• SIP Calculator

Related Articles

• Compound Interest Formula
• SIP Calculator Guide
• Simple vs Compound Interest

FAQ

Q: What is a good CAGR for investments in India? A: For equity mutual funds, 12-15% CAGR over 10+ years is considered good. FDs give 6-7% CAGR. Nifty 50 has historically delivered ~12% CAGR over 20 years.

Q: CAGR and compound interest — same formula? A: Yes, mathematically identical. CAGR = finding the rate, Compound Interest = finding the future value. Same concept, different unknown variable.

Q: Can CAGR be negative? A: Yes — if your investment lost value. ₹1L becoming ₹60K in 3 years = CAGR of -15.6%.

Q: Why can’t I use CAGR for my SIP? A: SIP involves multiple investments at different times. Each installment has a different holding period. Use XIRR (Extended Internal Rate of Return) instead.

Q: How is CAGR different from average annual return? A: Average return is arithmetic mean (sum ÷ years). CAGR is geometric mean (accounts for compounding). Example: +100% then -50% = average 25% but CAGR = 0% (you’re back to start).