CAGR Calculator
Calculate Compound Annual Growth Rate
Investment Details
Results
CAGR
14.87%
Absolute Return
100.00%
Total Gain
₹100,000
What is CAGR?
CAGR (Compound Annual Growth Rate) represents the rate at which an investment would have grown if it grew at a steady rate annually. It smoothens out volatility and gives you a single percentage that represents overall growth over multiple years.
Why CAGR Matters
• True Performance: Shows actual annualized return, not just total return
• Easy Comparison: Compare different investments with different time periods
• Realistic Expectations: Understand what consistent growth rate you achieved
• Investment Planning: Set realistic return expectations for future goals
CAGR Formula
CAGR = [(Final Value / Initial Value)^(1/Number of Years) - 1] × 100
Example: ₹1 lakh grows to ₹2 lakh in 5 years
CAGR = [(2,00,000 / 1,00,000)^(1/5) - 1] × 100 = 14.87%
CAGR vs Absolute Return
Absolute Return: Simple percentage gain = (Final - Initial) / Initial × 100
CAGR: Annualized return considering compounding effect
If investment doubles in 5 years: Absolute Return = 100%, but CAGR = 14.87%
CAGR is more useful for comparing investments with different time periods
Frequently Asked Questions
Why is CAGR considered a better metric than absolute return?
CAGR accounts for the time value of money and the compounding effect, whereas absolute returns just show the total percentage growth regardless of how much time it took. CAGR provides an annualized rate, making it easier to compare investments over varying time periods.
Can CAGR be negative?
Yes. If your final investment value is lower than your initial investment, the CAGR will be negative, representing an annualized loss.
Does CAGR show investment volatility?
No, CAGR assumes a steady growth rate and obscures the actual volatility and fluctuations an investment might have gone through over the periods.