About the CAGR Calculator
CAGR, or compound annual growth rate, is the single yearly rate at which a value would have had to grow to get from its starting figure to its final figure. This CAGR calculator works it out from the initial value, the final value and the number of years, and also shows the absolute return, which is the total percentage change over the whole period.
Investors use CAGR to compare mutual funds, shares, property or gold held for different lengths of time on a like-for-like basis. Business owners use the same measure for revenue, profit or customer growth, and it appears in almost every investor pitch and bank proposal. Because it converts any period into an annual rate, it is far more useful for comparison than a simple total return.
CAGR depends only on the start value, the end value and the time between them. It deliberately ignores what happened in between, so an investment that swung wildly and one that grew steadily can show the same CAGR. It also assumes a single investment at the start. If you invested in instalments or made withdrawals along the way, XIRR is the appropriate measure rather than CAGR.
How to use it
- 1Enter the value at the start of the period.
- 2Enter the value at the end of the period.
- 3Enter the number of years between the two; use decimals for part years.
- 4Read the CAGR, the absolute return and the total gain or loss.
How this is calculated
CAGR = (Final value ÷ Initial value)^(1 ÷ n) − 1 n = number of years (decimals allowed). Absolute return = (Final value − Initial value) ÷ Initial value. Both are shown as percentages.
Frequently asked questions
What is the formula for CAGR?
CAGR equals the final value divided by the initial value, raised to the power of one divided by the number of years, minus one. The result is expressed as a percentage. For example, an investment that grows from ₹1,00,000 to ₹2,00,000 in five years has a CAGR of about 14.87%.
What is the difference between CAGR and absolute return?
Absolute return is the total percentage change over the whole period and ignores time, so doubling your money shows 100% whether it took three years or ten. CAGR converts that into a yearly rate, which makes investments held for different periods comparable. For periods under a year, absolute return is normally used.
Is CAGR the same as average annual return?
No. A simple average of yearly returns ignores compounding and usually overstates growth when returns fluctuate. For instance, a gain of 50% followed by a loss of 50% averages zero, yet you have lost a quarter of your money. CAGR reflects the actual start and end values, so it gives the true compounded rate.
When should I use XIRR instead of CAGR?
Use XIRR when money goes in or comes out at different times, as with a SIP, staggered purchases of shares, or partial withdrawals. XIRR accounts for the date and size of every cash flow. CAGR is correct only when there is one investment at the beginning and one value at the end.
Can CAGR be negative?
Yes. If the final value is lower than the initial value, CAGR is negative and shows the average yearly rate at which the value declined. The calculator reports the loss and the negative rate in that case. A value that falls to zero gives a CAGR of minus 100%.