worldofcalcsCAGR Calculator
About CAGR Calculator
Compound Annual Growth Rate (CAGR) summarizes the average yearly growth between a starting and ending value over a period, smoothing volatility into a single rate.
Features
- Simple inputs: start value, end value, and years.
- Instant CAGR percentage output.
- Useful for performance comparisons.
Common Uses
- Comparing fund or portfolio growth.
- Business revenue growth analysis.
- Long-term performance summaries.
How to Use
- Enter starting value.
- Enter ending value.
- Provide the number of years.
- Read the CAGR as a percentage.
What is CAGR?
CAGR (compound annual growth rate) is the steady yearly rate at which an investment would have grown from its starting value to its ending value. Real returns go up and down from year to year; CAGR smooths them into a single annual figure. That makes it the standard way to compare mutual funds, stocks, property and other investments held for different lengths of time.
CAGR formula
Divide the end value by the start value, raise the result to the power of 1 ÷ number of years, and subtract 1. Multiply by 100 for a percentage. CAGR only uses the start and end values, so it ignores the ups and downs in between and any money added or withdrawn along the way. For SIPs or irregular cash flows, XIRR is the right measure.
Using CAGR correctly
- CAGR versus absolute return: a 100% gain sounds large, but over 10 years it's only 7.2% a year.
- CAGR versus average return: an investment that gains 50% one year and loses 50% the next has an average return of 0% but a CAGR of −13.4%, because you end with 75% of what you started with.
- Use XIRR for SIPs, where money goes in at different times. CAGR is for one-time investments.
- Compare investments over the same period: a fund's 3-year and 10-year CAGR can be very different.
- Mutual fund factsheets show returns for periods longer than a year as CAGR.
Worked example: ₹2 lakh to ₹5 lakh in 7 years
- Start value: ₹2,00,000. End value: ₹5,00,000. Period: 7 years
- Growth multiple: ₹5,00,000 ÷ ₹2,00,000 = 2.5
- CAGR = 2.5^(1/7) − 1 = 0.1399, or 13.99% a year
- The absolute return is 150%, but spread over 7 years it's about 14% a year, which is the fairer comparison
- With the calculator's default values (₹1 lakh growing to ₹3 lakh in 5 years), CAGR is 24.57%
CAGR for common growth multiples
The annual growth rate needed for money to grow by each multiple over 3, 5 and 10 years.
| Growth | 3 years | 5 years | 10 years |
|---|---|---|---|
| 1.5× | 14.5% | 8.4% | 4.1% |
| 2× | 26.0% | 14.9% | 7.2% |
| 3× | 44.2% | 24.6% | 11.6% |
| 5× | 71.0% | 38.0% | 17.5% |
For example, doubling your money (2×) in 5 years needs a CAGR of 14.9%.