CAGR Calculator

What Is CAGR?

CAGR (compound annual growth rate) is the steady yearly rate at which an investment would have grown from its starting value to its ending value. It turns an uneven journey - up 30% one year, down 10% the next - into one comparable number, so you can compare investments held for different lengths of time.

How to Use It

1. Enter the starting value and the ending value.
2. Enter the number of years between them (decimals such as 2.5 are allowed).
3. Read the CAGR, the absolute return and how long the money takes to double at that rate.

Example

An investment that grew from ₹2,00,000 to ₹4,50,000 in 7 years has a CAGR of 12.28%. Its absolute return is 125%, which sounds impressive but says nothing about time - 125% over 7 years is very different from 125% over 20. At 12.28% a year, money doubles in about 6 years.

The CAGR Formula

CAGR = (Ending value ÷ Starting value)^{1 ÷ years} − 1. For the example: (4,50,000 ÷ 2,00,000)^1/7 − 1 = 0.1228, or 12.28%.

CAGR vs Other Return Measures

• Absolute return ignores time and is only useful for short periods.
• CAGR works for a single investment with no money added or taken out in between.
• XIRR is needed when you invested at different times, as in a SIP.

Limitations

CAGR hides volatility: two investments with the same CAGR may have had very different ups and downs. It does not work for SIPs or other investments with several cash flows. To project future growth at a given rate, use the Compound Interest Calculator; to adjust for rising prices, use the Inflation Calculator.