CAGR Calculator
Find the compound annual growth rate of an investment from its starting and ending value over any number of years.
The CAGR calculator gives you the smoothed annual growth rate of an investment. CAGR is the single yearly rate at which your money would have had to grow, compounded every year, to reach its final value — it is the fairest way to compare investments held for different periods.
How to use the calculator
- Enter the initial value — what you invested.
- Enter the final value — what it is worth now (or at exit).
- Add the holding period in years (decimals allowed).
- The result shows the CAGR, absolute profit and how many times your money grew.
How it is calculated
Where n is the holding period in years. Absolute return = Final − Initial.
Worked example
₹1,00,000 became ₹2,50,000 in 5 years
CAGR = (2.5)1/5 − 1 ≈ 20.1% per year
Absolute return = ₹1,50,000 and the money multiple is 2.5x.
Who should use this calculator
- Investors comparing a mutual fund's long-term performance with an index over the same period.
- Anyone checking whether a property, gold or equity purchase actually beat inflation over several years.
- Business owners measuring the growth rate of revenue or profit across multiple years.
- People reviewing a portfolio where different holdings were bought and sold at different times.
Common mistakes to avoid
- Comparing CAGR figures over different periods. A fund showing 18% over three years is not automatically better than one showing 14% over ten — the shorter period may simply have caught a bull run.
- Ignoring dividends and income. CAGR calculated only from price movement understates the real return if the investment paid dividends or interest.
- Using CAGR for a short, volatile period. Over a year or two, a single sharp move dominates the number and tells you very little about the investment.
- Mixing pre-tax and post-tax returns. A 12% CAGR before capital gains tax is not the same as 12% in your hand. Compare like with like.
- Treating CAGR as a forecast. It is a backward-looking summary of what already happened, not a prediction of next year's return.
Why CAGR beats a simple average
If ₹1 lakh falls 50% in the first year and rises 50% in the second, the average annual return looks like 0%. In reality you now have ₹75,000 — a 25% loss. Averages hide the order in which returns arrive, and order matters when money compounds.
CAGR avoids this by asking a single question: what steady annual rate would have taken the starting value to the ending value? For ₹1,00,000 growing to ₹2,50,000 over five years the answer is about 20.1% a year. That makes CAGR the fairest way to compare investments held for different lengths of time, and it is the figure to quote when you review a portfolio. Just remember it smooths out the bumps you actually lived through.
CAGR terms explained
- Absolute return
- The total percentage gain, ignoring how long it took. ₹1 lakh to ₹1.5 lakh is a 50% absolute return whether it took one year or ten.
- CAGR
- Compound Annual Growth Rate — the steady yearly rate that would produce the same final value over the period.
- Money multiple
- How many times your money grew. A move from ₹1 lakh to ₹2.5 lakh is a 2.5x multiple.
- Volatility
- How much the value swings along the way. CAGR says nothing about this, which is why a smooth 12% and a bumpy 12% can feel completely different.
- Holding period
- The time between purchase and sale. It is the divisor in the CAGR calculation, so it must be measured accurately.
Reading a CAGR figure honestly
A CAGR number on its own says very little. A sector fund showing 22% over three years is not comparable to an index fund showing 14% over fifteen, because the shorter period may cover a single bull run and carry far more risk. When you see a CAGR, ask three questions: over what period, in what kind of investment, and with how much volatility along the way? CAGR also ignores the path entirely — two investments can end at the same place with very different experiences, and the one that fell 40% in year two is much harder to hold on to than the one that climbed steadily.
Frequently asked questions
Why is CAGR better than average return?
A simple average ignores the effect of compounding and can overstate reality. If an investment falls 50% then rises 50%, the average is 0% but you are still down 25%. CAGR reflects the true compounded result over the whole period.
Does CAGR include dividends?
CAGR measures the change in value only. If you received dividends, add them to the final value (assuming you did not reinvest) or use total return with reinvested dividends for a fairer picture.
Can CAGR be negative?
Yes. If the final value is lower than the initial value, the CAGR will be negative, showing the annualised rate of loss over the holding period.