Contents
- 1 CAGR Calculator — Compound Annual Growth Rate
CAGR Calculator — Compound Annual Growth Rate
Calculate the annualised growth rate of any investment between two points in time, with year-by-year value chart and goal-based reverse calculation.
Visual Breakdown
How to Use the CAGR Calculator
- Enter Initial Value: The amount you originally invested or the starting value of your asset (in rupees).
- Enter Final Value: The current value or terminal value of your investment.
- Enter Duration: The number of years (fractional values like 3.5 or 7.25 are accepted) between the two valuations.
- Read the CAGR: The annualised growth rate, money multiplier, and absolute return are computed instantly. The growth chart shows year-wise compounded values.
What is CAGR (Compound Annual Growth Rate)?
CAGR is the constant annual rate at which an investment would have grown to reach its final value, assuming profits were reinvested every year. It smooths out volatile annual returns into a single, comparable figure. Unlike simple average return, CAGR captures the compounding effect — a critical distinction for long-horizon investing.
The Formula
CAGR = (Final Value / Initial Value)^(1/Number of Years) − 1 Expressed as a percentage. For example: ₹1,00,000 grown to ₹3,00,000 over 5 years → CAGR = (300000/100000)^(1/5) − 1 = (3)^0.2 − 1 = 0.2457 = 24.57%.
Why CAGR Matters
- Cross-asset comparison: Compare the smoothed return of a mutual fund, fixed deposit, real estate, and gold investment over the same period on a like-for-like basis.
- Reality check vs hype: Marketing materials often quote absolute returns (“doubled in 7 years”) which sound impressive but translate to a 10.4% CAGR — modest for equity.
- Goal planning: Knowing your historical CAGR helps project realistic future corpus values. Reverse the formula to compute the rate you need to reach a goal.
- Performance attribution: Fund manager performance is benchmarked against the CAGR of the relevant index (NIFTY 50 TRI, NIFTY 500 TRI).
CAGR vs Simple Average Return
The two are NOT the same. A simple average ignores compounding and can be misleading, especially with volatile returns.
| Year | Annual Return | Year-End Value (₹1L start) |
|---|---|---|
| 1 | +50% | 1,50,000 |
| 2 | −30% | 1,05,000 |
| 3 | +20% | 1,26,000 |
Simple Average: (50 − 30 + 20)/3 = 13.3% — misleadingly positive. CAGR: (126000/100000)^(1/3) − 1 = 8.01% — the actual annualised return. CAGR is always less than or equal to simple average for volatile returns (mathematical identity called the AM-GM inequality). Use CAGR for honest performance assessment.
CAGR Benchmarks for Indian Asset Classes (Long-Term)
| Asset Class | Long-Term CAGR (illustrative) | Typical Holding Period |
|---|---|---|
| Savings Account | 3 – 4% | Any |
| Bank FD (Senior Citizen) | 6.5 – 7.5% | 1 – 5 years |
| PPF | ~7.1% (current rate) | 15 years |
| Gold (physical/SGB) | 8 – 10% | 5 – 10 years |
| Indian Real Estate | 8 – 12% (varies sharply by city) | 10+ years |
| NIFTY 50 Index Fund | 11 – 13% | 10+ years |
| Mid-Cap Mutual Fund | 13 – 16% | 10+ years |
| Small-Cap Mutual Fund | 14 – 18% (with higher volatility) | 10+ years |
Worked Examples
Example 1: HDFC Flexi Cap Fund (Illustrative)
Suppose ₹1,00,000 invested in HDFC Flexi Cap on 1 April 2015 grew to ₹3,15,000 by 31 March 2025. Duration: 10 years. CAGR = (315000/100000)^(1/10) − 1 = (3.15)^0.1 − 1 = 12.16% The fund delivered a 12.16% CAGR — beating the typical NIFTY 50 benchmark of around 11% during the same period. Absolute return: 215%. Money multiplier: 3.15x.
Example 2: Reverse CAGR — Goal Planning
You want ₹1 crore in 20 years. You can invest ₹10 lakh today. What CAGR do you need? CAGR = (10000000/1000000)^(1/20) − 1 = (10)^0.05 − 1 = 12.20% You need an investment delivering ~12.2% CAGR — achievable via a NIFTY index fund or a quality flexi-cap mutual fund over 20 years (historically).
Example 3: Real Estate Reality Check
A flat purchased in Bangalore for ₹35 lakh in 2010 sold for ₹85 lakh in 2024 (14 years). CAGR = (85/35)^(1/14) − 1 = (2.43)^0.0714 − 1 = 6.55% Far below the perceived “doubled my money” excitement. Adjusted for inflation (~5%), real return ≈ 1.5%. Real estate appreciation in India over the last decade has been notably modest compared to equity.
Common Mistakes When Using CAGR
- Mixing nominal and real returns: CAGR usually shows nominal returns. For purchasing-power comparisons, subtract inflation (use the Real Return Calculator).
- Cherry-picking start/end dates: A bull market peak as start point flatters CAGR; a market trough flatters it the other way. Use rolling-period CAGR for honest comparisons.
- Ignoring fees and taxes: Gross CAGR ≠ Net CAGR. Mutual fund expense ratios (0.5–2%) and LTCG tax (12.5% on listed equity above ₹1.25L) eat into reported returns.
- Using on irregular cash flows: CAGR assumes a single lump-sum investment. For SIPs or staggered investments, use XIRR (see our XIRR Calculator).
- Trusting short-window CAGR: 3-year CAGR during a bull cycle can mislead you into believing it represents long-term expectations. Verify against 10+ year rolling returns.
Frequently Asked Questions
Is CAGR the same as IRR?
No. CAGR assumes a single lump-sum investment at the start. IRR (Internal Rate of Return) handles irregular cash flows — for SIPs, partial withdrawals, or multi-stage investments, use IRR / XIRR.
What is a “good” CAGR for equity mutual funds in India?
Over long horizons (10+ years), 11–13% CAGR for large-caps and 13–16% for mid/small-caps is considered solid. Anything sustainably above 15% CAGR over 10+ years is exceptional. Be sceptical of funds advertising 25%+ short-window CAGR — almost always partial-cycle data.
Why does my mutual fund show different CAGR than I calculated?
Likely because the fund computes XIRR on your actual cash flows (SIPs across months), while you used start-end CAGR. XIRR accounts for the differing holding periods of each instalment.
Can CAGR be negative?
Yes, if the final value is less than the initial value (you lost money). The formula still works — for example, ₹1L declining to ₹70K over 5 years yields CAGR = (0.7)^0.2 − 1 = −6.89%.
Should I use CAGR or absolute return when evaluating an investment?
Use CAGR for comparing investments held over different periods. Use absolute return when comparing investments held for the same period or when you just want to know how much money you made.
How does inflation affect CAGR?
CAGR is nominal — it ignores inflation. Real CAGR = ((1 + nominal CAGR) / (1 + inflation rate)) − 1. If your fund delivers 12% CAGR and inflation is 6%, real CAGR is roughly 5.66% — still positive, but materially less.
Is CAGR taxed?
CAGR is just a measure — it isn’t directly taxed. The underlying capital gains are taxed when you sell. Listed equity LTCG is 12.5% above ₹1.25L; STCG is 20% (post Budget 2024). Debt funds (post-April 2023) are taxed at slab rate regardless of holding period.
How is CAGR different from rolling returns?
CAGR is a single number for one start-end period. Rolling returns average CAGR over multiple overlapping windows (e.g., every 5-year window over 15 years of data), giving a more robust picture of performance.
Why do real estate CAGRs feel disappointing?
Indian residential real estate has delivered 4–8% CAGR over the last decade in most cities — below NIFTY’s 11–12%. Add in maintenance, property tax, illiquidity, and transaction costs (5–8% buy/sell), and net real estate returns often barely beat inflation. Rental yields (2–3% in metros) help but are taxed at slab rate.
Can I use CAGR for cryptocurrency?
Yes, mathematically. But crypto’s extreme volatility makes any CAGR window highly dependent on start/end dates. A 5-year crypto CAGR from 2018 bear-market start would look very different from 2020 bull-market start. Use rolling CAGR or median rolling returns for honest assessment.