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.
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 do I use CAGR for future planning?
Once you know an asset\u2019s 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.