How to use the CAGR Calculator
- Enter the value at the start, for example the amount you originally invested.
- Enter the value at the end, for example today’s value of the investment.
- Enter the number of years between the two values. Use decimals for part years.
- Read the CAGR, the absolute return and the total gain. Use the year-by-year table to see the smooth path that CAGR implies.
Formula used
CAGR = (Ending value ÷ Starting value)^(1 ÷ years) − 1.
Worked example
Here is the CAGR Calculator worked through with the example values shown above, so you can check each step by hand.
| Inputs | |
|---|---|
| Starting value | ₹1,00,000 |
| Ending value | ₹2,50,000 |
| Number of years | 5 years |
| Result | |
| CAGR | 20.11% |
| Absolute return | 150% |
| Total gain | ₹1,50,000 |
Year-by-year path at this CAGR
If the investment grew at exactly the CAGR shown, this is the value it would have at the end of each year.
| Year | Value |
|---|---|
| 1 | ₹1,20,112 |
| 2 | ₹1,44,270 |
| 3 | ₹1,73,286 |
| 4 | ₹2,08,138 |
| 5 | ₹2,50,000 |
The CAGR formula
CAGR = (Ending value ÷ Starting value)^(1 ÷ years) − 1. For an investment that grows from ₹1,00,000 to ₹2,50,000 in 5 years, the ratio is 2.5. The fifth root of 2.5 is about 1.2011, so the CAGR is 20.11% a year.
Notice how this differs from absolute return. The total gain is 150%, and dividing by 5 years would suggest 30% a year, which is wrong because it ignores compounding. The CAGR of 20.11% compounds to the same final value: 1,00,000 × 1.2011⁵ ≈ 2,50,000.
Using CAGR to compare investments
Suppose one fund turned ₹1,00,000 into ₹2,50,000 in 5 years, and another turned ₹1,00,000 into ₹3,00,000 in 7 years. The first has a CAGR of 20.11%, and the second has 16.99%. The second ended higher, but the first grew faster each year. CAGR makes that visible.
Time changes the picture dramatically. A doubling in 3 years is a CAGR of 25.99%, while the same doubling in 10 years is only 7.18%.
What CAGR does not tell you
CAGR smooths out the ride. An investment that fell 30% in one year and then recovered can show the same CAGR as one that grew steadily, but the experience of holding them is very different. It also depends on the start and end dates you pick, so a result measured from a market low looks better than one from a high.
CAGR applies to a single lump sum. If you invested regularly, as with a SIP, the correct measure is XIRR, which accounts for the timing of each investment. Do not use CAGR for that.
Practical uses
People use CAGR to check the growth of a stock or fund, to estimate how quickly a salary or business revenue has grown, and to work out the return needed to reach a goal. For example, to turn ₹1,00,000 into ₹10,00,000 in 15 years you need a CAGR of about 16.59%.
Compare the CAGR with inflation to see your real return. If an investment grew at 6% and prices rose by 6%, your purchasing power did not improve.
Frequently asked questions
What is CAGR?
CAGR is the constant yearly growth rate that would take a starting value to an ending value over a number of years, with the growth compounded each year.
How do I calculate CAGR?
Divide the ending value by the starting value, raise the result to the power 1 ÷ years, and subtract 1. This calculator does it for you.
Is CAGR the same as average return?
No. An average of yearly returns ignores compounding and can overstate growth. CAGR reflects the actual path from start to end.
Can I use CAGR for a SIP?
Not accurately. A SIP has many investments at different times, so XIRR is the right measure.
Can CAGR be negative?
Yes. If the ending value is lower than the starting value, the CAGR is negative, showing a yearly loss.
What is a good CAGR?
It depends on the asset, the risk and the period. Compare it with inflation and with similar investments over the same years.
This calculator gives estimates for information only. Actual figures from a bank, employer, tax authority or doctor may differ. It is not financial, tax, legal or medical advice.