CAGR Calculator – Calculate Compound Annual Growth Rate

Introduction

“Compound growth is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” – Albert Einstein

CAGR Calculator is one of the most reliable tools for measuring investment growth over time. Whether you’re tracking mutual funds, stocks, or your overall portfolio, CAGR (Compound Annual Growth Rate) shows you the average yearly return, smoothing out market volatility. Unlike simple return percentages, CAGR gives a more realistic picture of how your wealth has actually grown.

On this page, you’ll find:
✅ A free online CAGR Calculator
✅ The formula and step-by-step guide with example
✅ Why CAGR is important in investing
✅ FAQs every trader and investor should know

What is CAGR?

CAGR stands for Compound Annual Growth Rate. It shows how much your investment grew every year if it had grown at a constant rate.

It is different from absolute return, which only compares the beginning and end values. CAGR accounts for the time duration and makes different investments comparable.

CAGR Formula: CAGR = (Final Value / Initial Value)^(1 / Years) – 1

Example Calculation

Suppose you invested ₹1,00,000 in 2018 and by 2023 it grew to ₹2,00,000.

Initial Value = ₹1,00,000
Final Value = ₹2,00,000
Years = 5

CAGR = (200000 / 100000)^(1 / 5) – 1
CAGR = (2)^(0.2) – 1
CAGR = 0.1487 = 14.87%

So your investment grew at an average annual rate of 14.87%.

Why Use a CAGR Calculator?

Many investors focus only on absolute returns, but that often gives a misleading picture. For example, an investment that doubles in 10 years may sound impressive, but CAGR reveals whether the growth is consistent or irregular. A CAGR calculator saves time, avoids manual errors, and helps compare different investments on the same scale.

CAGR in Real Life

Mutual Funds: Compare long-term performance of equity and debt funds.
Stocks: Identify consistent compounders instead of short-term gainers.
Retirement Planning: Check whether your investments are compounding fast enough to meet future goals.

Limitations of CAGR

While CAGR is powerful, it assumes steady growth — which may not always match real-world fluctuations. That’s why it’s best used with other metrics like XIRR, volatility analysis, and drawdowns.

Why is CAGR Important?

Removes Volatility – Markets are not linear; CAGR smooths out irregular yearly returns.
Easy Comparison – Compare mutual funds, stocks or portfolios on a fair basis.
Long-Term View – Focuses on actual compounded growth, not short-term noise.
Decision-Making – Helps investors choose better-performing funds or stocks.

Example: If Fund A gave 12% CAGR and Fund B gave 9% CAGR over the same period, Fund A clearly performed better, even if B had higher short-term spikes.

CAGR vs Other Metrics

Metric	Meaning	Best Use Case	Limitation
Absolute Return	% growth from start to end	Quick check	Ignores time
CAGR	Annual compounded growth	Long-term investment comparison	Ignores volatility
XIRR	CAGR with irregular cash flows	SIPs, SWPs, partial withdrawals	Needs cash flow data

👉 For lump-sum investments, CAGR is the best measure. For SIP or SWP, use XIRR Calculator.

FAQs on CAGR Calculator

1. What is a good CAGR in stock market?
For equity investments in India, a CAGR of 12–15% over long term is considered very good.

2. Can CAGR be negative?
Yes. If your final value is less than your initial investment, CAGR will show negative returns.

3. Is CAGR useful for SIP investments?
Not directly. For SIPs or irregular investments, use XIRR (Extended Internal Rate of Return) instead.

4. CAGR vs IRR – which is better?
CAGR works for simple start-to-end investments. IRR/XIRR works better when there are multiple inflows and outflows.

🔗 Related Tools

Conclusion

CAGR is one of the most powerful metrics for measuring investment growth. It helps you focus on true long-term performance and compare different options fairly.

Use our free CAGR Calculator above to quickly analyze your portfolio returns. Combine it with tools like SIP Calculator and XIRR Calculator to get a complete picture of your financial journey.

CAGR Calculator – Calculate Your Investment Growth