CAGR expresses an investment's overall growth as a single, smoothed annual percentage, which makes it easy to compare returns across investments with different holding periods, even though actual year-to-year returns fluctuate.
How to Use This Calculator
- Enter the starting (initial) investment value.
- Enter the ending (final) investment value.
- Enter the number of years between the two values.
- View the calculated CAGR.
How the Calculation Works
CAGR = ((Ending Value / Starting Value)^(1/n) − 1) × 100
Where n = number of years.
Worked Example
An investment growing from ₹1,00,000 to ₹2,00,000 over 5 years: CAGR = ((2,00,000/1,00,000)^(1/5) − 1) × 100 ≈ 14.87% per year.
Who Should Use This
Investors comparing the historical performance of two or more investments, or evaluating how a specific holding has performed on an annualised basis.
Important Considerations
CAGR smooths out volatility and does not reflect the actual path of returns — an investment could have had a very rocky ride and still show a smooth CAGR figure. It also doesn't account for additional contributions or withdrawals during the period (use XIRR for that).
Common Mistakes
Using CAGR for an investment with multiple cash flows (like a SIP) instead of a single starting and ending value gives a misleading figure — use the XIRR calculator for investments with periodic contributions.
References
See also the XIRR Calculator for investments with multiple cash flows.