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CAGR (Compounded Annual Growth Rate) Calculator

Use this easy Goal SIP calculator to know the how much you need to invest,adjusted for inflation.

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CAGR Calculator — Measure the True Annual Growth Rate of Any Investment

When someone says a mutual fund "returned 80% over the last 5 years," that tells you very little about how it actually performed — because 80% over 5 years could mean wildly different things depending on when the growth happened. Compounded Annual Growth Rate (CAGR) converts any multi-year return into a single, consistent annual rate that makes different investments, different time periods, and different asset classes directly comparable. This CAGR Calculator does that in seconds: enter the initial value, final value, and tenure in years, and get the precise annualized growth rate.

It's used everywhere in investing and business — from evaluating mutual fund performance, to measuring a startup's revenue growth, to comparing a real estate investment against equity returns. Understanding CAGR is fundamental to making informed financial decisions.

The CAGR Formula Explained

CAGR is calculated using:

CAGR = (Final Value ÷ Initial Value)1/n − 1

Where n = number of years.

Example: You invested ₹1,00,000 in a mutual fund 7 years ago. Today it is worth ₹2,50,000. CAGR = (2,50,000 ÷ 1,00,000)1/7 − 1 = (2.5)0.1429 − 1 ≈ 0.1399 = 13.99% p.a.

This tells you the investment grew at a compounded rate of ~14% per year — as if the ₹1 lakh grew by exactly 14% each year, every year. In reality, some years may have been 25%, others −10%, but CAGR smooths those into one consistent number.

CAGR vs Average Annual Return — Why the Difference Matters

These two metrics often diverge significantly, and the gap reveals a crucial truth about volatility and investing. Consider this example:

  • Year 1: +100% (₹1,00,000 → ₹2,00,000)
  • Year 2: −50% (₹2,00,000 → ₹1,00,000)

Simple average return: (100% + (−50%)) ÷ 2 = +25%/year — sounds great. But you've ended up exactly where you started with zero actual gain.

CAGR: (1,00,000 ÷ 1,00,000)1/2 − 1 = 0% — correctly shows no growth.

CAGR always reflects actual compounded wealth creation. Average annual return can be manipulated or misinterpreted because it ignores the sequence and compounding effect of returns. This is why SEBI mandates that mutual fund performance be disclosed as CAGR, not simple average returns.

Practical Applications of CAGR in Investing

Comparing mutual fund performance: Two funds showing "10-year returns of 180% and 160%" are not easily comparable. But CAGR converts these: 180% over 10 years = 10.8% CAGR; 160% over 10 years = 10.0% CAGR. The first fund outperforms by 0.8% annually — which compounded over 10 years represents a meaningful difference in final corpus.

Evaluating real estate vs equity: A property bought for ₹40 lakh in 2014 and worth ₹85 lakh in 2024 has a CAGR of (85/40)1/10 − 1 ≈ 7.8% p.a. Compare this with an equity mutual fund that delivered 13% CAGR over the same period. Factor in rental yield, maintenance costs, and liquidity — and CAGR helps make the comparison objective.

Business revenue growth analysis: A company with revenue of ₹50 crore in FY2020 and ₹120 crore in FY2025 has grown at (120/50)1/5 − 1 ≈ 19.1% CAGR. This single number communicates the growth rate cleanly for investors, boards, and analysts.

When CAGR Has Limitations

CAGR is powerful but not without blind spots. It only considers the start and end point — it tells you nothing about the journey in between. Two investments with identical CAGR could have wildly different volatility profiles: one smooth and predictable, the other swinging wildly between gains and losses. For risk-adjusted performance comparison, CAGR should be paired with standard deviation or Sharpe ratio.

CAGR is also not suitable for investments with multiple cash flows — SIPs, recurring deposits, or dividend-paying instruments with reinvestment. For those, use XIRR (Extended Internal Rate of Return), which handles uneven cash flows and arbitrary investment dates. Most mutual fund statements and financial planning tools calculate XIRR for SIP returns rather than CAGR.

Finally, CAGR is a historical measure — past CAGR does not predict future returns. A fund that delivered 18% CAGR over 10 years may deliver 10% or 6% over the next 10, depending on market conditions and fund management.

Frequently Asked Questions About CAGR

Context is everything. For large-cap equity funds, a 10-year CAGR of 11–14% is considered strong. For mid-cap or small-cap funds, 14–18% CAGR over 10 years is achievable in good market cycles. For debt funds, 6–8% CAGR is typical. Always compare a fund's CAGR to its benchmark (e.g., Nifty 50, Nifty Midcap 150) — a fund delivering 12% CAGR when the benchmark returned 13% has actually underperformed, despite the healthy-looking absolute number.
Yes. If the final value is less than the initial value, CAGR will be negative. For example, ₹1 lakh invested, worth ₹70,000 after 5 years: CAGR = (0.7)0.2 − 1 ≈ −6.7% p.a. This means the investment lost purchasing value at 6.7% per year compounded — which is worse than keeping it in an FD or even a savings account.
CAGR works with a single lump sum — one starting value and one ending value over a fixed period. XIRR (Extended Internal Rate of Return) handles multiple cash flows at irregular dates — exactly what happens with SIP investments (monthly investments at different dates). For SIP return calculation, always use XIRR. For lump sum investments, FD maturity, or real estate appreciation, CAGR is the appropriate metric.
Funds typically highlight the time period that shows their best CAGR. A fund that performed strongly 3 years ago but has slowed recently may feature 3-year CAGR prominently. Always look at CAGR across multiple periods — 1, 3, 5, 10 years — to get a complete picture. Consistent outperformance across all periods is a much stronger signal than exceptional performance in just one window.
Yes — CAGR works both forwards and backwards. To project future value given a CAGR: Future Value = Initial Investment × (1 + CAGR)n. For example, ₹5 lakh invested at 12% CAGR for 10 years = ₹5 lakh × (1.12)10 ≈ ₹15.5 lakh. This is the same as the Lumpsum Calculator. Remember this is a projection, not a guarantee — actual returns will vary.
For real estate, CAGR is typically calculated on the property's capital appreciation only. But a complete return picture must also include rental yield (additional income stream) and subtract transaction costs (stamp duty, registration, brokerage: typically 7–10% at purchase and 1–2% at sale) and ongoing costs (property tax, maintenance). Real estate CAGR that appears comparable to equity often underperforms on a net-of-costs, risk-adjusted, liquidity-adjusted basis.
Nifty 50 has delivered approximately 12–13% CAGR over 20-year rolling periods (as of 2024), making it a widely used benchmark for large-cap equity expectations. However, point-to-point returns vary dramatically — Nifty's 10-year CAGR from 2000 to 2010 was approximately 14%, while from 2008 to 2018 (starting at a market peak) it was closer to 10%. Always calculate CAGR from a specific start and end point rather than relying on headline long-term averages.


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