CAGR Calculator
Calculate Compound Annual Growth Rate
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About CAGR Calculator
CAGR (Compound Annual Growth Rate) is the rate at which an investment grows annually over a specified time period. It's the most accurate way to measure investment returns as it smooths out volatility and shows the steady annual growth rate. CAGR is essential for comparing different investments held for different periods.
How is CAGR Calculated?
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Enter the initial value of your investment or business metric
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Enter the final value after the investment period
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Specify the duration in years (can include decimals for months)
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CAGR = (Final Value / Initial Value)^(1/Years) - 1
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Result shows annualized growth rate assuming steady compounding
Example:
If you invested ₹1 lakh which grew to ₹2 lakhs in 5 years, your CAGR is 14.87% - meaning your investment effectively grew at 14.87% annually, even if actual year-to-year returns varied!
Key Benefits
Accurate Comparison: Compare returns across different investments and time periods fairly
Smooths Volatility: Eliminates the noise of year-to-year fluctuations
Simple Metric: One number to understand investment performance
Future Projections: Use historical CAGR to project future growth
Business Analysis: Measure revenue, profit, or user growth rates
Benchmark Performance: Compare your returns with market indices or competitors
Frequently Asked Questions
What is a good CAGR for investments in India?
For equity mutual funds: 12-15% CAGR is good long-term performance. Large-cap funds typically deliver 10-12% CAGR, mid-caps 12-18%, small-caps 15-20%. Individual stocks can achieve 20%+ CAGR. Real estate historically shows 8-10% CAGR. Gold averages 8-12% CAGR. Compare with Sensex long-term CAGR of ~15%.
What's the difference between CAGR and absolute return?
Absolute return is total percentage gain without considering time: (Final-Initial)/Initial × 100. CAGR annualizes this return. Example: 100% return over 5 years = 14.87% CAGR. CAGR is better for comparing investments with different time periods. Use absolute return for same-period comparisons.
Can CAGR be negative?
Yes, negative CAGR indicates annual loss. If ₹1 lakh becomes ₹80,000 in 3 years, CAGR is -7.2%. This shows your investment lost 7.2% value annually. Negative CAGR in equity investments over 5+ years indicates poor fund management or bad stock selection. Consider exiting such investments.
Is CAGR the same as annualized return?
Yes, CAGR and annualized return are the same concept. Both measure average yearly growth rate. Some use 'annualized return' for market-linked investments and 'CAGR' for general growth metrics. The calculation and interpretation are identical.
Should I use CAGR or XIRR for SIP returns?
Use XIRR for SIP investments with multiple cash flows at different times. CAGR works only for single lumpsum investments. XIRR (Extended Internal Rate of Return) accounts for timing and amount of each SIP installment, giving more accurate returns for systematic investments.
How to calculate CAGR for less than 1 year?
Use fractional years. For 6 months, use 0.5 years. For 3 months, use 0.25 years. However, CAGR for very short periods (< 1 year) can be misleading as it annualizes short-term fluctuations. Better to use simple percentage return for periods under 1 year.
What CAGR do I need to double my money?
Rule of 72: Divide 72 by CAGR to get years to double. At 12% CAGR: 72/12 = 6 years. At 18% CAGR: 4 years. Conversely, to double in 5 years, you need 14.87% CAGR. To double in 10 years, 7.2% CAGR is sufficient. This helps set realistic return expectations.
Can a stock with 50% CAGR be trusted?
Very high CAGR (40%+) over 3-5 years is possible for small-cap stocks or during bull markets, but rarely sustainable long-term (10+ years). Even the best companies average 20-25% CAGR over decades. Be skeptical of consistent 40%+ CAGR claims. Check company fundamentals, not just past returns.
How does inflation affect CAGR?
Real CAGR = Nominal CAGR - Inflation Rate. If investment gives 12% CAGR and inflation is 6%, your real purchasing power increased at 6% CAGR. Always consider inflation-adjusted returns for long-term wealth planning. Aim for real CAGR of at least 6-8% for meaningful wealth creation.
What CAGR does Warren Buffett achieve?
Warren Buffett has delivered approximately 20% CAGR over 50+ years through Berkshire Hathaway - doubling money roughly every 3.5 years. This is exceptional and very rare. Most professional fund managers struggle to beat 15% CAGR long-term. Individual investors should be satisfied with consistent 12-15% CAGR.
Should I chase high CAGR investments?
No, high past CAGR doesn't guarantee future returns. Very high CAGR often comes with high risk or is not sustainable. Focus on consistent moderate CAGR (12-15%) from diversified portfolio rather than chasing 25%+ CAGR in risky bets. Stability and sustainability matter more than spectacular short-term CAGR.
How to calculate CAGR for business revenue?
Use same formula: CAGR = (Final Revenue / Initial Revenue)^(1/Years) - 1. Example: Revenue grew from ₹10 Cr to ₹25 Cr in 5 years = 20.11% CAGR. This shows average annual business growth. Investors prefer companies with consistent 15-20% revenue CAGR for at least 5 years.