What is the CAGR?
CAGR (Compound Annual Growth Rate) is the constant yearly rate at which an investment would have grown from its initial to its final value. It smooths out the bumps and answers one question: what did this actually earn per year?
It is the antidote to misleading "absolute return" claims. "My property doubled!" sounds great — but if it took 12 years, that is a CAGR of just 5.9%, below an FD. Meanwhile a fund that "only" went from ₹5L to ₹12L in 7 years compounded at 13.3% a year.
Formula & worked example
Worked example: ₹5,00,000 grew to ₹12,00,000 in 7 years → CAGR = (12/5)1/7 − 1 = 1.1332 − 1 = 13.32% p.a. Absolute return is 140%, but the annualised 13.32% is the number to compare against a 7% FD or a fund factsheet.
Worked examples, checked against this calculator
Every figure below is this calculator's own output for the inputs shown.
| Investment | Start | End | Years | Absolute return | CAGR |
|---|---|---|---|---|---|
| Equity mutual fund, lump sum | ₹1,00,000 | ₹2,50,000 | 8 | 150% | 12.14% |
| Flat bought and sold | ₹40,00,000 | ₹75,00,000 | 10 | 87.5% | 6.49% |
| Small business revenue | ₹2 crore | ₹5 crore | 5 | 150% | 20.11% |
| A stock that fell | ₹50,000 | ₹35,000 | 3 | −30% | −11.21% |
| "My plot doubled" | ₹5,00,000 | ₹10,00,000 | 12 | 100% | 5.95% |
Look at rows one and three: both show a 150% absolute return, but one took 8 years and the other 5, so their CAGRs are 12.14% and 20.11%. That is the whole reason CAGR exists. The flat looks like a big win at "almost doubled", yet 6.49% a year is bank-FD territory — and that is before stamp duty, brokerage and maintenance are subtracted.
Using CAGR in reverse
The same formula answers two other questions people search for.
What will my money grow to?
₹2,00,000 compounding at 12% for 10 years → 2,00,000 × 1.1210 = ₹6,21,170. Enter ₹2,00,000, ₹6,21,170 and 10 years above and the calculator returns 12.00%.
How many years to reach a target?
To turn ₹1,00,000 into ₹3,00,000 at 10% a year: ln(3) ÷ ln(1.10) = 11.53 years. For doubling, the Rule of 72 is a good shortcut — 72 ÷ 10 = 7.2 years, which the calculator shows as the doubling time.
CAGR vs absolute return vs XIRR
| Measure | What it answers | Use it for |
|---|---|---|
| Absolute return | Total % gain, ignoring time | Holdings under one year |
| CAGR | Steady yearly rate from one start value to one end value | Lump sums, property, revenue, index levels |
| XIRR | Yearly rate across many cash flows on different dates | SIPs, top-ups, partial withdrawals |
Mutual fund factsheets in India show CAGR for periods over one year and absolute return for shorter periods, which is why a 6-month return is never "annualised" on a factsheet. If you invested through a SIP, your personal return is an XIRR — use the XIRR calculator instead.
CAGR in Excel or Google Sheets
With the start value in A2, the end value in B2 and years in C2:
Format the cell as a percentage. RRI is built into both Excel and Google Sheets and returns exactly the same number as the long formula.
Three ways CAGR misleads
- It hides the path. Two funds can both show 12% CAGR over 5 years while one fell 35% in the middle. CAGR says nothing about the ride.
- It depends on the dates chosen. Starting a 5-year window just after a crash flatters any fund; starting at a peak punishes it. Compare funds over the same dates.
- It is pre-tax and pre-inflation. A 12% CAGR with 6% inflation is roughly a 5.7% real return, and tax takes a further slice when you sell.
How to use this cagr calculator
- Enter the starting value (purchase price / initial investment).
- Enter the current or sale value.
- Set the holding period in years — decimals accepted in the box (e.g., 4.5).
- Compare the CAGR against benchmarks: savings ~3%, FD ~7%, Nifty long-run ~12%.
Smart tips
- Use CAGR to compare anything: stocks vs property vs gold vs your business revenue — one common yardstick.
- CAGR hides volatility: a fund with 13% CAGR may have fallen 30% along the way. Check risk separately.
- For investments with multiple deposits/withdrawals (like SIPs), the right metric is XIRR, not CAGR.
- Real-estate sellers quote absolute gains; always annualise. Doubling in 10 years is 7.2%, in 6 years 12.2%.
- Adjust mentally for inflation: a 12% CAGR during 6% inflation is a ~5.7% real return.
Frequently asked questions
What is a good CAGR for an investment?
Context decides: 7% matches a bank FD; 10–12% matches broad Indian equity indices; anything claiming 20%+ sustained for a decade is exceptional and deserves scepticism. Compare like with like — and always post-tax.
What is the difference between CAGR and absolute return?
Absolute return ignores time (₹5L→₹12L = 140% whether it took 3 years or 30). CAGR spreads that growth into an equivalent constant yearly rate, making different holding periods comparable.
CAGR vs XIRR — which one do I need?
CAGR fits a single lump-in, lump-out investment. XIRR handles multiple cash flows on different dates (SIPs, top-ups, partial redemptions). For a simple buy-and-hold, they are the same thing.
Can CAGR be negative?
Yes — if the final value is below the initial value, CAGR is negative, meaning the investment shrank on average each year. The calculator handles this correctly.
How is CAGR calculated for 5 years?
Divide the ending value by the starting value, raise it to the power 1/5 and subtract 1. ₹2 crore of revenue growing to ₹5 crore in 5 years: (5/2)^(1/5) − 1 = 20.11% a year.
Is CAGR the same as annual return?
Not quite. Annual returns are the actual year-by-year figures, which vary. CAGR is the single steady rate that would have produced the same end value. The average of the yearly returns is usually higher than the CAGR when returns are volatile.
What is the CAGR formula in Excel?
=(End/Start)^(1/Years)-1, or the built-in =RRI(Years, Start, End). Both give the same answer; format the cell as a percentage.
How do I use CAGR for future planning?
Once you know an asset’s historical CAGR, use it as the return input in our SIP, Lumpsum or Retirement calculators to project forward — with a conservative haircut, since the past never guarantees the future.
Want the theory behind the numbers? Read our money terms explained on the Money Blog.