CAGR formula
CAGR = (Ending value ÷ Beginning value)^(1 ÷ years) − 1
For example, an investment that grows from ₹1 lakh to ₹2.5 lakh in 5 years has a CAGR of about 20.1%, even though its absolute return is 150%.
CAGR vs absolute return
Absolute return only measures total growth and ignores time. CAGR annualises that growth, so a 50% gain over 2 years and a 50% gain over 5 years show very different CAGRs. The calculator also shows how long money takes to double at your CAGR.
Frequently asked questions
What is a good CAGR?
It depends on the asset class and risk taken. Compare a fund’s CAGR with its benchmark and with peers over the same period rather than against a fixed number.
Is CAGR the same as average annual return?
No. CAGR is the smoothed compound rate between two points. A simple average of yearly returns ignores compounding and usually overstates growth.
Can I use CAGR for a SIP?
CAGR suits a single investment with one start and end value. For SIPs, where money goes in at different times, XIRR is the better measure.