CAGR formula
CAGR = (Final value ÷ Initial value)^(1 ÷ Years) − 1Worked example
An investment grows from ₹1,00,000 to ₹2,50,000 in 6 years. The absolute return is 150%, but the CAGR is (2.5)^(1/6) − 1 ≈ 16.5% a year. That is the figure to compare against a fund's or index's annual returns.
Fractional years
You can enter part-years, such as 2.5 for two and a half years. For periods under a year CAGR annualises the return, which can make short-term gains look unrealistically large.
Frequently asked questions
What is CAGR?
Compound Annual Growth Rate is the constant yearly return that would take an investment from its starting value to its ending value over the period. It smooths out the ups and downs along the way.
CAGR vs absolute return — what is the difference?
Absolute return is the total percentage gain, ignoring time. CAGR annualises it, so you can compare investments held for different lengths of time.
When should I use XIRR instead?
CAGR assumes one investment at the start and one value at the end. If you added or withdrew money along the way, as with a SIP, use the XIRR calculator.
Results are estimates for educational purposes only and are not investment, tax or financial advice. Verify figures with your broker or advisor before acting on them.