Find the compound annual growth rate of any investment — the single steady yearly rate that links its start and end value.
What CAGR tells you
CAGR — Compound Annual Growth Rate — answers a simple question: if your investment had grown by the same percentage every year, what would that percentage be? It smooths a bumpy real-world journey into one steady, comparable annual rate.
CAGR = (Ending ÷ Beginning)1 ÷ years − 1
The result is a percentage. Because it builds in compounding, CAGR is the standard way to compare the growth of funds, stocks or any asset held over time.
Worked example: ₹1,00,000 → ₹2,50,000 in 7 years
(2,50,000 ÷ 1,00,000)1/7 − 1 = (2.5)0.143 − 1 ≈ 13.99% per year. The money grew 2.5× — an absolute return of 150.00% — but the fair annualised figure is the CAGR. Quoting the 150% absolute gain without the 7-year context would overstate how good the investment really was.
CAGR vs absolute return
Absolute return is the total gain ignoring time; CAGR annualises it. The same 150.00% absolute gain is excellent over 7 years but mediocre over 20. Whenever you compare two investments held for different periods, convert both to CAGR first — otherwise the longer holding looks artificially better. Absolute return flatters long horizons; CAGR levels the field.
What CAGR hides
CAGR assumes a smooth ride that rarely happens. An investment that fell 40% one year and doubled the next can show the same CAGR as a steady performer — but the experience and the risk are completely different. Use CAGR to rank growth, then look at volatility and the worst drawdown to judge risk. CAGR also ignores any cash you added or withdrew along the way; for staggered monthly investing, returns are better measured with our SIP calculator.
Using CAGR to plan forward
CAGR looks backward. To project a future value at an assumed growth rate, flip to our compound interest calculator or lumpsum calculator — they use the same compounding math in the forward direction. A realistic long-run equity CAGR for India has historically been around 10–12%, but treat that as a reference, never a promise.
Frequently Asked Questions
What is CAGR?
CAGR (Compound Annual Growth Rate) is the single steady annual rate at which an investment would have grown from its starting value to its ending value, as if it compounded smoothly each year. It strips out the year-to-year ups and downs to give one comparable number.
How is CAGR calculated?
CAGR = (Ending value ÷ Beginning value)1/years − 1, expressed as a percentage. For ₹1,00,000 growing to ₹2,50,000 in 7 years, that is (2.5)1/7 − 1 ≈ 13.99% per year. The calculator applies this exactly.
CAGR vs absolute return — what is the difference?
Absolute return is the total percentage gain ignoring time: ₹1,00,000 to ₹2,50,000 is a 150.00% absolute gain. CAGR annualises that over the holding period, here about 13.99% a year. Absolute return looks impressive on long holdings; CAGR is the fair way to compare investments held for different lengths of time.
Is a higher CAGR always better?
A higher CAGR means faster compounding, but it ignores risk and volatility. A 15% CAGR from a wildly swinging small-cap fund is not directly comparable to a 12% CAGR from a steadier large-cap fund — the path matters. Use CAGR to compare growth, then weigh the risk separately.
Can CAGR be negative?
Yes. If the ending value is lower than the beginning value, CAGR is negative — the investment shrank at that annualised rate. CAGR is only meaningful for positive starting and ending values; it cannot describe an investment that went to zero.
What is a good CAGR for equity in India?
Indian equity indices have historically delivered roughly 10–12% CAGR over long periods, though any individual fund or stock can do much better or worse. Treat that as a long-run reference, not a guarantee — past CAGR does not predict future returns. For projecting forward growth, use our
compound interest calculator or
lumpsum calculator.
Estimates are for information and education only — not financial, tax or investment advice. Verify current rates and rules with official sources.