How this cagr calculator works
CAGR = (ending value / starting value)^(1 / years) - 1. The result is shown as an annual percentage rate.
Worked example
If ?1,00,000 grows to ?2,00,000 in 5 years, CAGR is about 14.87%. This does not mean the investment grew 14.87% every single year.
Assumptions
- The starting value is greater than zero.
- The period is measured in years.
- Cash flows during the period are not included.
- The result smooths growth into one annualised rate.
Limitations
- CAGR hides volatility and sequence of returns.
- It is not suitable when there are multiple deposits or withdrawals unless cash flows are handled separately.
- Past CAGR does not predict future returns.
Frequently asked questions
What is CAGR?
CAGR means compound annual growth rate, a smoothed annual growth measure between a starting and ending value.
Is CAGR the same as average return?
No. Arithmetic average return and CAGR can differ, especially when yearly returns are volatile.
Can CAGR be negative?
Yes. If ending value is below starting value, CAGR is negative.
Can I use CAGR for mutual funds?
You can use it to annualise point-to-point growth, but SIP returns need XIRR or SIP-specific calculation.
Does this include tax?
No. It compares values entered by the user.
What period should I enter?
Use the exact holding period in years or approximate it carefully.
Why use CAGR?
It helps compare different investments across different time periods using one annualised number.