CAGR Calculator
Calculate the Compound Annual Growth Rate of your investments over time
📊 What is CAGR (Compound Annual Growth Rate)?
CAGR (Compound Annual Growth Rate) is the smoothed annual growth rate of an investment between a beginning value and an ending value over a specific time period. It answers:"At what constant annual rate did my investment grow?"
💡 Pro Tip: CAGR is ideal for comparing investments with different time horizons. An investment that doubled in 5 years (CAGR 14.87%) performed better than one that doubled in 10 years (CAGR 7.18%).
Unlike simple average returns, CAGR accounts for the compounding effect, giving you a more accurate picture of how your money grew over time.
📐 CAGR Formula
The CAGR is calculated using this formula:
CAGR = (Ending Value / Beginning Value)^(1/n) - 1Example Calculation
If you invested $10,000 that grew to $25,000 over 5 years:
CAGR = ($25,000 / $10,000)^(1/5) - 1 = 20.11%
⚖️ CAGR vs Absolute Return vs Average Return
| Metric | Definition | Best For |
|---|---|---|
| CAGR | Annualized compound growth rate | Comparing long-term investments |
| Absolute Return | Total % gain/loss | Simple profit measurement |
| Average Return | Sum of yearly returns ÷ years | Can be misleading! |
| XIRR | Annualized return with cash flows | SIPs, irregular investments |
⚠️ Why Average Return is Misleading: If an investment gains 100% in year 1 and loses 50% in year 2, the average return is +25%, but your actual CAGR is 0% (you are back to where you started!).
📈 Historical CAGR by Asset Class (Reference)
| Asset Class | 10-Year CAGR | 20-Year CAGR | Risk Level |
|---|---|---|---|
| US Stock Market (S&P 500) | 10-12% | 8-10% | High |
| Indian Equity (Nifty 50) | 11-14% | 12-15% | High |
| Gold | 5-8% | 8-10% | Medium |
| Real Estate | 6-10% | 8-12% | Medium |
| Fixed Deposits | 5-7% | 6-8% | Low |
*Historical returns are indicative and vary by time period, region, and market conditions. Past performance does not guarantee future results.
✅ When to Use CAGR (and When Not To)
✅ Use CAGR For
- ✓ Lumpsum investments held over time
- ✓ Comparing funds/stocks with different tenures
- ✓ Business revenue growth analysis
- ✓ Portfolio performance tracking
❌ Do Not Use CAGR For
- ✗ SIPs or regular investments (use XIRR)
- ✗ Investments with multiple cash flows
- ✗ Short-term trading (< 1 year)
- ✗ Volatile assets over short periods
❓ Frequently Asked Questions
What is a good CAGR for investments?
A good CAGR depends on the asset class and risk. Equity typically targets 10-15%, while fixed income aims for 6-8%. Any CAGR that beats inflation (typically 4-6%) grows your real wealth.
Can CAGR be negative?
Yes. If your ending value is less than your beginning value, CAGR will be negative, indicating your investment declined over the period.
What is inflation-adjusted CAGR (Real CAGR)?
Real CAGR = Nominal CAGR - Inflation Rate. It shows your actual purchasing power growth. A 12% CAGR with 6% inflation gives you only 6% real growth.
How do I calculate required CAGR for a goal?
Use the same formula with your target value as ending value. For example, to grow Rs.10L to Rs.1Cr in 15 years, you need: (100/10)^(1/15) - 1 = 16.59% CAGR.