CAGR Calculator
Calculate Compound Annual Growth Rate (CAGR) for your investments or business revenue.
Investment Growth
CAGR
Annual Growth Rate
20.11%
Smoothed annualized return rate over the period.
The Truth About Returns
CAGR is the most honest metric for evaluating long-term investments because it tells you the effective annual return.
Example: Average vs CAGR
- Year 1: +50%
- Year 2: -50%
- Average Return: (50 - 50) / 2 = 0%.
- Actual Money: Invest 100 -> Goes to 150 -> Drops to 75.
- CAGR: -13.4% (Loss).
The average says you broke even. CAGR tells the truth: you lost money.
When to use CAGR?
- ✅ Evaluating Mutual Funds (Lump sum).
- ✅ Stock Price Performance.
- ✅ Business Revenue Growth.
- ❌ SIP Returns (Use XIRR).
- ❌ Short term (< 1 year) Gains.
Frequently Asked Questions
What is CAGR?
Compound Annual Growth Rate (CAGR) is the rate at which an investment would have grown if it had grown at a steady rate. It smoothes out the volatility of year-on-year returns.
What is the CAGR Formula?
CAGR = `((Final Value / Initial Value)^(1 / Number of Years)) - 1`. Multiply by 100 to get percentage.
How is CAGR different from Average Return?
Average return (arithmetic mean) ignores compounding and overestimates growth. CAGR (geometric mean) accounts for compounding and volatility, giving a realistic picture.
Can CAGR be negative?
Yes, if the final value is lower than the initial value, the CAGR will be negative, indicating a loss.
What is a good CAGR for stocks?
Historically, the Nifty 50 has delivered 12-14% CAGR. Anything above 15% over 10+ years is considered exceptional.
Does CAGR consider risk?
No. CAGR only looks at the start and end points. It ignores the wild fluctuations (risk) that happened in between.
Can I use CAGR for SIPs?
No. CAGR requires a single lump sum investment. For SIPs (multiple cash inflows), you should use XIRR (Extended Internal Rate of Return).
Is CAGR applicable for less than 1 year?
CAGR is technically 'Annual'. For periods less than a year, 'Absolute Return' is the correct metric.
Why is my 3-year CAGR low?
Market cycles affect CAGR. If you enter or exit at a bad time (e.g., during a crash), your CAGR will look poor even if the fund is good.
How to compute 'Real' CAGR?
Adjust for inflation: `Real CAGR = ((1 + Nominal CAGR) / (1 + Inflation Rate)) - 1`.