CAGR Calculator — Compound Annual Growth Rate
| Year | Value (₹) | Growth (₹) |
|---|---|---|
| 0 | 1,00,000 | — |
| 1 | 1,14,870 | 14,870 |
| 2 | 1,31,951 | 17,081 |
| 3 | 1,51,572 | 19,621 |
| 4 | 1,74,110 | 22,538 |
| 5 | 2,00,000 | 25,890 |
CAGR is a theoretical growth rate that assumes smooth compounding. Actual investment returns vary year to year. Past CAGR does not guarantee future returns.
What is CAGR?
Compound Annual Growth Rate (CAGR) is the rate at which an investment grows from its beginning value to its ending value over a specific number of years, assuming the growth is compounded annually. It is a single number that represents the smoothed annual return of an investment, eliminating the effect of year-to-year volatility.
CAGR is the most commonly used metric to evaluate and compare investment performance in mutual funds, stocks, business revenue, and any other growing quantity. When a fund advertises "12% CAGR returns over 10 years," it means if you had invested at the start, your money would have grown as if it earned exactly 12% every year — even though actual yearly returns would have varied considerably.
CAGR Formula
CAGR = (FV ÷ PV)^(1/n) − 1
| Variable | Meaning |
|---|---|
| FV | Future (ending) value |
| PV | Present (beginning) value |
| n | Number of years |
To find the future value given a CAGR, rearrange the formula:
FV = PV × (1 + CAGR)^n
Worked Example
CAGR vs Absolute Return vs XIRR
Investors often confuse these three return metrics. Here's how they differ:
| Metric | Formula | Best Used For | Limitation |
|---|---|---|---|
| Absolute Return | (FV - PV) / PV × 100 | Quick total gain calculation | Does not account for time period |
| CAGR | (FV/PV)^(1/n) - 1 | Comparing lump-sum investments of different durations | Assumes single lump-sum investment; ignores SIP cash flows |
| XIRR | Iterative (Excel/calculator) | SIP returns with multiple cash flows on different dates | More complex to calculate manually |
For a single lump-sum investment (bought once, held to a single maturity), CAGR is the correct metric. For SIPs or investments with multiple contributions, use XIRR for an accurate measure of returns. Mutual fund fact sheets report CAGR for lump-sum performance and XIRR for SIP returns.
Real-World CAGR Benchmarks (India)
Here are typical CAGR ranges for major Indian investment categories over different periods:
| Asset Class | 5-Year CAGR | 10-Year CAGR | Risk |
|---|---|---|---|
| PPF | 7.1% (fixed) | 7.1% (fixed) | None |
| Bank FD (1 year) | 6.5–7.5% | 6–7.5% | Very Low |
| Nifty 50 Index | 11–14% | 11–13% | High |
| Large-Cap Equity Funds | 10–14% | 11–14% | High |
| Mid-Cap Equity Funds | 13–20% | 12–17% | Very High |
| Gold (INR) | 8–14% | 9–12% | Medium |
| Residential Real Estate | 5–12% | 7–12% | Medium |
Past returns are not indicative of future performance. The above are historical approximations only.
Frequently Asked Questions
What is CAGR and what does it mean?
CAGR (Compound Annual Growth Rate) is the rate at which an investment would have grown if it grew at a steady rate compounded annually. It is a smoothed average growth rate that ignores year-to-year volatility. For example, if an investment of ₹1 lakh grows to ₹2 lakh in 5 years, the CAGR is 14.87% — meaning the investment grew as if it earned 14.87% every year, even if the actual yearly returns varied widely.
What is the CAGR formula?
CAGR = (Ending Value / Beginning Value)^(1/Number of Years) - 1. For example, ₹1 lakh growing to ₹3 lakh in 10 years: CAGR = (3,00,000 / 1,00,000)^(1/10) - 1 = 3^0.1 - 1 = 1.1161 - 1 = 11.61% per year. To express as percentage, multiply by 100.
What is a good CAGR for investments in India?
A "good" CAGR depends on the asset class and risk level. Typical benchmarks: Bank FDs: 6–8% CAGR; Debt mutual funds: 6–9% CAGR; Balanced hybrid funds: 9–12% CAGR; Large-cap equity funds: 11–14% CAGR; Mid/small-cap equity funds: 13–18% CAGR (higher risk); Real estate (Tier 1 cities): 7–12% CAGR; PPF: 7.1% CAGR (risk-free, tax-free). The Nifty 50 index has delivered approximately 11–13% CAGR over the past 20 years.
What is the difference between CAGR and absolute return?
Absolute return is the total percentage gain over the entire investment period without accounting for time. For example, ₹1 lakh growing to ₹2 lakh is a 100% absolute return regardless of whether it took 3 years or 10 years. CAGR normalises this for time — the same 100% gain translates to 26% CAGR over 3 years but only 7.2% CAGR over 10 years. CAGR is far more useful for comparing investments held for different periods.
Can CAGR be negative?
Yes. If the ending value is less than the beginning value, CAGR will be negative. For example, if you invested ₹1 lakh and it is now worth ₹70,000 after 5 years, the CAGR = (70,000/1,00,000)^(1/5) - 1 = 0.7^0.2 - 1 = 0.9318 - 1 = -6.82%. A negative CAGR indicates the investment lost value at an annualised rate.
Related Calculators
- SIP Calculator — Systematic Investment Plan returns using XIRR-equivalent formula
- Compound Interest Calculator — FV with different compounding frequencies
- Lumpsum Calculator — One-time investment growth with year-by-year table
- Investment Calculator — Lump sum and recurring contributions combined