CAGR (Compound Annual Growth Rate) is the smoothed annualised return that an investment achieved between a starting and ending value. Unlike average return, CAGR accounts for compounding — making it the honest measure for comparing investments of different durations.
What is CAGR?
If your stock went from ₹100 to ₹250 over 5 years, what was the annual return? Simple division gives 30% per year, but that's wrong — it doesn't account for compounding. The actual annualised return (CAGR) is just over 20%.
CAGR is a geometric mean — the constant rate that, applied each year, would take you from start to end. It smooths out the year-to-year volatility (which can be huge for stocks). A stock might return 50%, -30%, 80%, -10%, 30% — CAGR tells you the equivalent steady rate.
CAGR is the standard metric for comparing investments. Mutual fund factsheets quote CAGR for 1Y, 3Y, 5Y, 10Y. Personal finance bloggers compare asset classes via CAGR. The Rule of 72 (years to double = 72 / CAGR%) gives intuitive understanding.
The CAGR formula
- Start
- Initial value—investment value at the beginning of the period
- End
- Final value—investment value at the end
- years
- Duration—in years; supports decimals (e.g., 4.5 for 4.5 years)
How to use this calculator
Three inputs: starting value, ending value, duration in years.
Enter starting value
Investment amount or stock value at the beginning of the period.
Enter ending value
Current value or value at the end of the period you're measuring.
Enter duration
In years. Use decimals for partial years (3.5 for 3 years 6 months).
When to use CAGR
Comparing mutual funds
5-year CAGR is the standard fair comparison across funds. Don't use 1-year returns for comparison — too much noise.
Stock investment review
Bought stock at ₹50 in 2018, it's ₹240 in 2026. CAGR tells you the annualised return — useful to compare against alternatives.
Goal verification
If you need ₹1 crore in 10 years from ₹20 lakh today, you need 17.5% CAGR. The calculator tells you whether your investments are on track.
Real estate vs equity
Compare your property's CAGR (purchase to current value) against equity CAGR over the same period. Often illuminating.
Glossary
- CAGR
- Compound Annual Growth Rate — annualised return assuming compounding.
- Geometric mean
- The mathematical concept underlying CAGR — appropriate for compounding sequences.
- Arithmetic mean
- Simple average. Overestimates returns for volatile assets.
- Rule of 72
- Mental shortcut: years to double = 72 / CAGR%. Reasonably accurate for 5-15% rates.
- XIRR
- Extended IRR — used when there are multiple cash flows in/out (e.g., SIP). CAGR works for single in / single out.