CAGR Calculator
Calculate the Compound Annual Growth Rate (CAGR) of an investment based on its beginning value, ending value and the number of years held. CAGR expresses lumpy, real-world investment growth as a single smoothed annual rate, making it easier to compare investments held over different time periods.
Fill in the form and select "Calculate" to see your results here.
What is CAGR?
The Compound Annual Growth Rate (CAGR) is the annualised, smoothed rate at which an investment would have grown if it had grown at a steady, constant rate every single year, rather than the lumpy, uneven returns it actually experienced. Real investments rarely rise by the same percentage every year — a stock or fund might gain 30% one year, fall 10% the next, and gain 5% after that. CAGR ignores that year-to-year path entirely and instead answers a simpler question: what single constant annual rate, compounded every year, would take the beginning value to the ending value over the given number of years? This makes CAGR a useful way to summarise and compare the overall growth of an investment, even though no year of the investment's actual history may have grown at exactly that rate.
How to use this calculator
- Enter the initial value of the investment — what it was worth at the start of the period.
- Enter the final value of the investment — what it is worth (or was worth) at the end of the period.
- Enter the number of years between the two values. Decimals are allowed if the period isn't a whole number of years.
- Select "Calculate CAGR" to see the annualised growth rate and the absolute gain over the period.
Formula
Ending Value is the investment's value at the end of the period, Beginning Value is its value at the start, and Years is the length of the holding period. Raising the ratio of the two values to the power of 1 divided by the number of years finds the constant per-year multiplier that, compounded over that many years, produces the same overall growth — subtracting 1 and multiplying by 100 converts that multiplier into a percentage growth rate.
Example
Suppose an investment was worth ₹1,00,000 at the start and grew to ₹2,50,000 after 5 years. Dividing the ending value by the beginning value gives 2.5. Raising 2.5 to the power of 1/5 gives approximately 1.2011, and subtracting 1 and multiplying by 100 gives a CAGR of approximately 20.11% per year. The absolute gain over the period is ₹2,50,000 − ₹1,00,000 = ₹1,50,000, but the CAGR figure tells you the investment grew at an annualised rate of roughly 20.11% every year to get there — a very different, and more comparable, figure than the 150% total gain over the whole 5-year period.
Factors that affect CAGR
- CAGR smooths out volatility. It only looks at the beginning and ending values, so it cannot show how bumpy the actual journey was — an investment that fell sharply and later recovered can show the same CAGR as one that grew steadily the whole time.
- Short periods can be misleading. Over very short holding periods, a single good or bad year can produce an annualised CAGR that looks unrealistically high or low compared to the investment's typical long-term behaviour.
- CAGR ignores intermediate cash flows. It assumes a single amount invested at the start and a single amount withdrawn at the end. If you added or withdrew money partway through — such as with a SIP or a partially redeemed fund — CAGR will not accurately capture your real annualised return, and a cash-flow-aware measure like XIRR is more appropriate for that case.
- A loss produces a negative CAGR, not zero. If the ending value is lower than the beginning value, the formula correctly returns a negative percentage, reflecting an annualised decline over the period.
Frequently Asked Questions
No. CAGR is a smoothed, hypothetical annual growth rate — it describes the constant rate that would take you from the beginning value to the ending value over the period, not the actual return earned in any single year. Your real year-to-year returns were almost certainly higher in some years and lower (or negative) in others, even though they averaged out to the CAGR shown here.
Yes. If the ending value is lower than the beginning value, CAGR will correctly come out negative, reflecting an annualised loss over the period. A negative CAGR is a meaningful, valid result — it is not treated as an error by this calculator.
Absolute return is simply the total percentage gain or loss over the whole period, regardless of how long that period was. CAGR annualises that same growth, so it accounts for the holding period and lets you fairly compare two investments held for different lengths of time. A 100% absolute return over 10 years is a much lower annualised rate than the same 100% return over 2 years.
No. CAGR assumes a single beginning value and a single ending value with no additional contributions or withdrawals in between. If you added or withdrew money during the period, CAGR will not accurately reflect your actual annualised return — a cash-flow-aware measure such as XIRR is designed for that situation instead.
Because CAGR only uses the beginning and ending values — it has no visibility into what happened in between. An investment could have risen sharply, crashed, and recovered, and still show a perfectly ordinary CAGR if the start and end points happen to line up that way. For short periods or highly volatile investments, CAGR can therefore understate how bumpy the actual ride was.
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Calculations are estimates based on the information entered. CAGR assumes a single beginning value and ending value with no intermediate contributions or withdrawals, and is not a substitute for professional financial advice. See our full disclaimer.