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CAGR = (end ÷ start)^(1 ÷ years) − 1

CAGR calculator

Turn a starting value, an ending value and a holding period into a compound annual growth rate — the yearly rate behind a total return.

Short answer: CAGR is (end ÷ start)^(1 ÷ years) − 1. ₹1,00,000 growing to ₹2,00,000 in five years is 14.87% a year — a 100% absolute return spread over five years.

Why use the annualised figure at all

Comparing a three-year investment that returned 40% with a seven-year one that returned 70% is impossible in your head. CAGR puts both on a per-year basis. It is a smoothing device, not a description: an investment that fell 30% then rose 100% has the same CAGR as one that crept up steadily, and only the steady one felt like that number.

Worked example

A fund goes from ₹2,50,000 to ₹4,00,000 in 6 years. Multiple = 1.6; CAGR = 1.6^(1/6) − 1 = 8.15%. Absolute return is 60%, and the difference between 60% and 8.15% is entirely the effect of compounding over six years.

When CAGR is the wrong tool

If money went in or out during the period, CAGR overstates or understates what you actually earned. Use XIRR for dated cash flows, and the SIP calculator when the investment was a monthly commitment.

CAGR questions

What is CAGR?

The compound annual growth rate is the single yearly rate that would take an investment from its starting value to its ending value over a period, assuming it grew at a steady rate. It smooths a bumpy journey into one comparable number, which is why fund factsheets quote it.

What is the CAGR formula?

CAGR = (ending value ÷ starting value)^(1 ÷ years) − 1. ₹1,00,000 becoming ₹2,00,000 in 5 years gives (2)^(1/5) − 1 = 14.87% a year, even though the absolute return over the period is 100%.

How is CAGR different from absolute return?

Absolute return is the total change — plus 100% in the example above. CAGR divides that out over time so two investments with different holding periods can be compared. Both are shown on this page because quoting only one is how performance gets oversold.

Does CAGR account for volatility or contributions?

No. It ignores the path taken and assumes no money was added or withdrawn in between. For irregular cash flows you need XIRR, and for a series of contributions the SIP calculator is the right tool.

Related tools

Compound interest calculatorForward-looking growth from a principal.SIP calculatorMonthly investments rather than a lump sum.Percentage calculatorQuick percentage change between two numbers.