CAGR Calculator

Compound Annual Growth Rate, universally abbreviated CAGR, is the single most useful number for evaluating long-term investment performance. Unlike absolute return (which tells you how much you made in total without context of time), or simple annual return (which is a misleading arithmetic average), CAGR tells you the constant rate at which an investment would have grown if it had grown smoothly every year, year after year, to reach the final value. It is the great equaliser that lets you compare a stock you held for 3 years with a mutual fund you held for 11 years on the same scale.

The CAGR formula is mathematically the geometric mean of yearly growth rates. By taking the n-th root of the total growth factor (final value divided by initial value), where n is the number of years, you arrive at the equivalent constant annual rate. This is precisely the same operation that bank compound interest performs in reverse: given a starting amount and an ending amount, what rate would have got you there?

Use this CAGR calculator to evaluate any one-time investment: a stock purchase, a real estate property, a mutual fund lumpsum, a fixed deposit, or even the value of your own business. You only need three numbers: the initial value (in rupees), the final value (in rupees), and the duration (in years). The calculator returns both CAGR and total absolute return, plus a year-by-year hypothetical breakdown showing what the smooth growth path would have looked like.

A crucial nuance: CAGR is not appropriate for evaluating SIP returns or any investment with multiple cash flows. SIPs involve dozens of separate purchases over months and years, each with its own holding period. The right metric for SIPs is XIRR (Extended Internal Rate of Return), which solves the more general problem of finding the constant rate that equates the present value of all cash flows to zero. Most mutual fund platforms now report XIRR alongside absolute return.

What counts as a 'good' CAGR depends entirely on the asset class. For Indian equity index funds (Nifty 50, Nifty 500), long-term CAGRs of 11-13% are reasonable historical averages over 15-20 year periods. For diversified actively managed equity funds, 12-15% is what the better funds deliver, often with 1-2% drag from expense ratios. For real estate in metros, 6-8% is the realistic long-term expectation, though many people anchor on the spectacular returns of 2003-2010 which were a one-time re-rating event. For gold (physical or sovereign gold bonds), the long-term CAGR has been around 9-10% in rupee terms, much of which comes from rupee depreciation against the dollar.

CAGR has limitations. It hides volatility — a stock that grew at a smooth 12% per year and a stock that grew at +50% in some years and -20% in others can have the identical CAGR over a long enough period, but the journeys are completely different. The smoother investment is dramatically less stressful to hold and easier to plan around. To capture this, look at CAGR alongside standard deviation or maximum drawdown.

CAGR also assumes you held the investment continuously without buying or selling. If you bought, sold, and bought back, your actual return depends on the timing of those decisions, not the CAGR of the underlying asset. This is one of the main reasons individual investors underperform the indices their funds track — entry and exit timing destroys returns.

For benchmarking your own investments, calculate CAGR every year on a rolling basis and compare to a relevant benchmark (Nifty 50 for large-cap funds, Nifty 500 for diversified, real-estate index for property). Anything that consistently underperforms the relevant benchmark by 1-2% over 5+ years deserves a hard look. Conversely, beating the benchmark over multiple market cycles is a strong signal of either skill or a meaningfully different exposure.