CAGR (Compound Annual Growth Rate) shows the smooth yearly return that would take your investment from start value to end value over a period. Investors use it to compare stocks, mutual funds, FD alternatives and business performance on equal footing.
CAGR formula
CAGR = (Ending Value ÷ Beginning Value)1/n − 1
- Ending Value — current portfolio or investment worth
- Beginning Value — initial investment
- n — number of years
Example
₹1 lakh invested grows to ₹2.5 lakh in 5 years.
CAGR = (2.5 ÷ 1)1/5 − 1 ≈ 20.1% per year (illustrative — use calculator for precision).
Simple average return would mislead; CAGR accounts for compounding path.
CAGR vs absolute return
- Absolute return — total % gain (e.g. 150% over 5 years)
- CAGR — yearly equivalent rate for comparison across different tenures
A 100% gain in 2 years has higher CAGR than 100% in 5 years.
When to use CAGR
- Comparing mutual fund performance over 3, 5, 10 years
- Evaluating lump-sum equity investment
- Business revenue or profit growth tracking
CAGR limitations
- Assumes steady growth — real markets are volatile
- Ignores timing of intermediate deposits — for SIP use XIRR Calculator
- Past CAGR does not guarantee future returns
Use Master Calc CAGR Calculator
Enter start value, end value and years in our CAGR Calculator. For irregular SIP/top-up investments, use XIRR Calculator. Track average buy price with Stock Average Calculator — free on Master Calc.
FAQ
Is CAGR same as annualized return? For a single lump-sum with no cash flows in between, CAGR equals geometric annualized return.
SIP ke liye CAGR ya XIRR? XIRR is better when you invest monthly or irregularly.
Disclaimer: Market investments carry risk. CAGR is a historical summary tool only.