CAGR Calculator
Calculate the Compound Annual Growth Rate (CAGR) — the single steady annual rate that turns a starting value into an ending value over a given number of years.
Growth Details
Compound Annual Growth Rate
20.11%
2.50× growth · 150.0% absolute
How It Works
CAGR (Compound Annual Growth Rate) answers a simple question: at what steady yearly rate would an investment need to grow to get from its starting value to its ending value over a given period? It smooths out the ups and downs of real returns into a single, comparable annual figure. The formula takes the ratio of final to initial value, raises it to the power of one divided by the number of years, and subtracts one. For example, an investment that grows from ₹1 lakh to ₹2.5 lakh over 5 years has a CAGR of about 20% — even if the actual year-to-year returns were volatile. CAGR is the standard way to compare investments, business revenues, or any quantity that grows over multiple periods, because it removes the distortion of different time spans and interim swings. Its limitation is that it assumes smooth growth and hides volatility — two investments with the same CAGR can have very different risk and paths.
Formula
CAGR = (Final Value ÷ Initial Value)^(1 / years) − 1, expressed as a percentage.
Frequently Asked Questions
What is CAGR in simple terms?
The constant yearly growth rate that would take a starting amount to an ending amount over a period. It smooths volatile real returns into one steady annual number for easy comparison.
How is CAGR different from average return?
A simple average of yearly returns overstates growth because it ignores compounding and the effect of losses. CAGR reflects the actual compounded outcome — it is always ≤ the simple average when returns vary.
How do I calculate CAGR?
CAGR = (Final ÷ Initial)^(1/years) − 1. Example: ₹1,00,000 growing to ₹2,00,000 in 6 years = (2)^(1/6) − 1 ≈ 12.2% per year.
What is a good CAGR for investments?
It varies by asset and risk. Long-term equity indices have historically delivered roughly 10-13% CAGR in India, while debt is lower. Compare a CAGR to relevant benchmarks and inflation, not a fixed target.
What is the limitation of CAGR?
CAGR assumes smooth growth and hides year-to-year volatility and drawdowns. Two investments with identical CAGR can have very different risk and price paths, so pair CAGR with volatility measures.