Worked example
Example with the default numbers — change them above.
Starting value: ₹1,00,000 · Ending value: ₹3,00,000 · Time between the two values: 5 yrs
₹1 L growing to ₹3 L in 5 years is a CAGR of 24.57% a year, a total gain of ₹2 L (200%).
| CAGR | 24.57% · a year, compounded |
|---|---|
| Total gain | ₹2 L · ₹1 L to ₹3 L |
| Absolute return | 200% · total change over 5 years |
| Growth multiple | 3.00× · of the starting value |
| Time to double | 3.2 years · at this yearly rate |
How the CAGR Calculator works
- Enter the value at the start, the value at the end and the number of years between them.
- Divide the ending value by the starting value to get the growth multiple.
- Take that multiple to the power of one divided by the number of years. This finds the yearly growth factor that, repeated each year, gives the same multiple.
- Subtract one and multiply by 100 to turn the factor into a percentage. That is the CAGR.
- The calculator also shows the absolute return, the time to double at this rate and the year-by-year path at a steady rate.
Compound annual growth rate
CAGR = (End value ÷ Start value) ^ (1 ÷ Years) − 1
Absolute return = (End value − Start value) ÷ Start value
Years = time between the two values (6 months is 0.5)Assumptions and limits
- CAGR treats the growth as one steady yearly rate. In reality returns rise and fall, so the actual path was bumpier than the chart.
- It works for a single investment with no money added or withdrawn in between. For a SIP or other regular cash flows, use XIRR instead.
- Dividends, interest and fees count only if they are inside the ending value.
- Inflation and tax are not included, so the figure is a nominal, pre-tax return.
Frequently asked questions
How do I calculate CAGR?
Divide the ending value by the starting value, raise the result to the power of one divided by the years, then subtract one. Written as a formula, CAGR = (End ÷ Start)^(1 ÷ Years) − 1. For ₹1 lakh growing to ₹3 lakh in 5 years, CAGR is about 24.57% a year. Enter your own numbers above for a quick answer.
What is the difference between CAGR and absolute return?
Absolute return is the total gain as a percent of the starting value, ignoring time. CAGR is the steady yearly rate that gives the same result over the period. A 200% absolute return over 5 years sounds large but is a CAGR of about 24.6%; the same 200% over 20 years would be only about 5.6% a year. CAGR makes different periods comparable.
What is the difference between CAGR and XIRR?
CAGR works for one investment with a start value and an end value. XIRR handles several cash flows at different dates, such as a monthly SIP with a final withdrawal. If you invested regularly, XIRR gives the true yearly return, and CAGR on the total invested would be misleading. For a single lump sum they agree.
Is CAGR the same as the average annual return?
No. The simple average of yearly returns ignores compounding and can mislead. If a fund gains 50% one year and then loses 50%, the average is 0%, but you ended with 25% less than you started with, a CAGR of about −13.4%. CAGR reflects what you actually earned after compounding.
What is a good CAGR?
It depends on the risk you took and the period you measured. Compare your CAGR with inflation, with the interest a bank deposit would have paid, and with a benchmark for the same type of investment over the same dates. A high CAGR over a short stretch may not repeat, and past CAGR does not guarantee future returns.
Can CAGR be negative?
Yes. If the ending value is lower than the starting value, the CAGR is negative. For example, ₹3 lakh falling to ₹1 lakh over 5 years is a CAGR of about −19.7% a year. The calculator shows this as a loss and draws the steady yearly decline from your start to your end value.
Sources
Logic and rates last verified on .
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