CAGR Calculator (Compound Annual Growth Rate)
Measure the constant annual geometric growth rate of your stocks, mutual funds, real estate, or business investments.
Total Absolute Return: 150.0% (₹1,50,000)
CAGR Compounding Trajectory
Compounding trajectory over time
Yearly Valuation at CAGR Growth
Detailed breakdown for each calendar year
| Year | Initial Principal | Gained Returns | Estimated Valuation |
|---|---|---|---|
| Year 1 | ₹1,00,000 | ₹20,110 | ₹1,20,110 |
| Year 2 | ₹1,00,000 | ₹44,264 | ₹1,44,264 |
| Year 3 | ₹1,00,000 | ₹73,276 | ₹1,73,276 |
| Year 4 | ₹1,00,000 | ₹1,08,121 | ₹2,08,121 |
| Year 5 | ₹1,00,000 | ₹1,49,975 | ₹2,49,975 |
How this is Calculated: CAGR Formula
Mathematical Formula
Variable Definitions
Worked Example Walkthrough
Scenario: ₹1,00,000 initial equity investment growing to ₹2,50,000 over 5 years.
Calculation: CAGR = (2,50,000 / 1,00,000)^(1 / 5) - 1 = (2.5)^0.2 - 1 = 20.11%
Result: CAGR: 20.11% p.a. | Total Absolute Growth: 150.0% (+₹1,50,000)
Assumptions & Methodology
- Smooths out annual investment volatility to show geometric mean growth.
- Assumes capital remained fully invested without dividends withdrawn.
About this Calculation Model
The Compound Annual Growth Rate (CAGR) Calculator measures the constant smoothed annual growth rate of an investment or financial asset from an initial beginning valuation to a terminal ending valuation over multiple years. It eliminates intermediate price volatility to show the steady geometric mean rate of return.
How to Choose Your Calculator Inputs
1Initial Investment Value
The beginning purchase price or portfolio valuation at Year 0.
2Final / Maturity Value
The ending valuation or liquidation price at the conclusion of the period.
3Duration in Years
The elapsed time period in years (or fractions of years).
Interpreting Your Projections
CAGR provides the most reliable metric for comparing the performance of two different assets (e.g., comparing mutual fund returns against real estate or gold) over equivalent multi-year holding periods. Unlike simple absolute return, CAGR normalizes for time.
Important Statutory & Practical Considerations
- Volatility Smoothing: CAGR assumes smooth, linear annual growth. It does not reflect significant interim market volatility, drawdowns, or capital risk.
- No Intermediate Cashflows: CAGR does not account for dividends withdrawn or additional capital deposited midway. For portfolios with recurring cashflows, XIRR (Extended Internal Rate of Return) should be evaluated.
- Endpoint Sensitivity: CAGR is heavily sensitive to the exact starting and ending valuation dates; choosing a market crash bottom or boom peak can distort the long-term trend.
Frequently Asked Questions
What is the formula for calculating CAGR?
CAGR = (Ending Value / Beginning Value)^(1 / Number of Years) - 1. Expressed as a percentage, multiply the result by 100.
When should I use CAGR instead of Absolute Return?
Absolute return only measures the total percentage gain regardless of how long it took. An 80% gain over 10 years (6.05% CAGR) is vastly inferior to an 80% gain over 3 years (21.64% CAGR). CAGR normalizes returns across time.
What is the difference between CAGR and XIRR?
CAGR evaluates a single lump sum investment over a fixed period without intermediate cashflows. XIRR is used when multiple deposits or withdrawals take place at irregular dates, such as in an active mutual fund SIP or stock portfolio.
Why can CAGR be misleading for highly volatile multi-year investments?
CAGR only looks at beginning and ending valuations, completely masking interim market crashes and drawdowns. Two investments with identical 12% CAGRs could exhibit vastly different risk profiles and sequence of returns.
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