CAGR Calculator
Calculate the Compound Annual Growth Rate (CAGR) of an investment from its initial value, final value and duration.
How is CAGR Calculated?
CAGR (Compound Annual Growth Rate) is the constant annual rate at which an investment would have grown from its initial value to its final value, smoothing out the actual year-to-year volatility into a single average rate.
CAGR = (Final Value / Initial Value)1/n − 1
- Final Value — The value at the end of the period
- Initial Value — The value at the start of the period
- n — Number of years
For example, an investment that grows from ₹1,00,000 to ₹2,00,000 over 5 years has a CAGR of about 14.87%, even though the actual year-to-year returns may have varied widely.
Frequently Asked Questions
How is CAGR different from absolute return?
Absolute return is the total percentage gain over the entire period, regardless of how long it took. CAGR annualizes that gain, making it possible to fairly compare investments held for different durations.
Does CAGR reflect actual year-to-year performance?
No. CAGR is a smoothed, hypothetical rate. An investment could have had sharp ups and downs along the way and still arrive at the same CAGR based purely on its start and end values.
Read more: CAGR vs XIRR: which one should you use for SIP returns?
Also see: SIP Calculator and Lumpsum Calculator