What is a CAGR Calculator?
CAGR (Compound Annual Growth Rate) restates the growth between two values over any period as a single, smoothed annual rate — as if it had grown by exactly that percentage every year, even though real returns are rarely that even. It's the standard way to compare investments held for different durations, or to compare a volatile investment's growth against a fixed deposit's stated rate.
Enter the beginning value, the ending value, and the number of years between them to get the CAGR.
How CAGR is calculated
n is the number of years between the two values. Because CAGR smooths out volatility, it can look healthy even for an investment that had a very bumpy path — it only describes the start and end points, not what happened in between.
Worked example: why CAGR and average return can tell very different stories
Take ₹1,00,000 that gains 50% in year one (rising to ₹1,50,000) and then loses 50% in year two (falling to ₹75,000). The simple average of a +50% year and a −50% year is 0% — which sounds like you broke even. You didn’t: you’re left with ₹75,000 from an original ₹1,00,000, a real loss. Run those numbers through the calculator above (beginning ₹1,00,000, ending ₹75,000, 2 years) and it correctly shows a CAGR of about −13.40% a year — the figure that actually reflects what happened to your money, unlike the misleading 0% simple average.
Why this happens: losses need a bigger gain to recover from
A 50% loss requires a 100% gain just to get back to where you started — not another 50% gain — because the base you’re recovering from has shrunk. This asymmetry is exactly why CAGR (inherently multiplicative, compounding gains and losses onto each other in sequence) diverges from a simple average (which just adds percentages and divides) whenever returns are volatile. The more volatile the path between your beginning and ending value, the larger this gap tends to be — which is also why two investments can report the same "average annual return" over a period while delivering very different real outcomes.
Where you’ll see CAGR used
Mutual fund fact sheets, stock screeners, and most investment comparisons quote CAGR (sometimes just labelled "annualised return") rather than a simple average, precisely because it’s the number consistent with what an investor who held the whole period actually experienced. It’s also the natural way to compare two investments held for different lengths of time — a 40% total gain over 3 years and a 40% total gain over 8 years reflect very different annual growth rates, and CAGR is what makes that difference visible.
Frequently asked questions
Is CAGR the same as average annual return?
No. A simple average of yearly returns can overstate real growth because it ignores compounding and the order of gains and losses. CAGR is the geometric, compounding-consistent measure and is almost always the more meaningful one.
Can CAGR be negative?
Yes — if the ending value is lower than the beginning value, CAGR will be negative, correctly reflecting an overall loss over the period.
Does CAGR account for additional investments along the way?
No — it only compares a single beginning and ending value. If you added money at multiple points in time, XIRR is the correct measure instead.
What’s a "good" CAGR for an equity mutual fund?
There’s no fixed benchmark, but broad Indian equity indices have historically delivered roughly 10–14% CAGR over long multi-decade stretches, with significant variation across shorter periods. Compare a fund’s CAGR against its category average and benchmark index over the same period, not against a single round number.
Can I use CAGR to project future returns?
Not reliably — CAGR describes what already happened between two points in time, not what will happen next. Past CAGR is a reference point at best, not a forecast, especially for market-linked investments.
How is CAGR different from IRR or XIRR?
CAGR assumes exactly one investment at the start and one value at the end. IRR and XIRR handle multiple cash flows at different times (regular SIP instalments, partial withdrawals, top-ups) and find the single rate that reconciles all of them — use the XIRR Calculator when your investment history has more than two data points.
Does CAGR work if the beginning or ending value is negative or zero?
No — the formula involves taking a root of a ratio, which isn’t mathematically meaningful with a zero or negative beginning value. This calculator requires both values to be positive numbers.