CAGR Calculator

CAGR is the Compound Annual Growth Rate: the single constant annual rate that would turn a beginning value into an ending value over a stated number of years. It answers one narrow question — if this change had happened at the same percentage every year, compounding, what percentage would that have been?

If ₹1,00,000 became ₹2,00,000 over five years, the CAGR is 14.87%. Growth of 14.87% a year, with each year’s growth calculated on the previous year’s ending value, produces exactly that doubling in exactly that time.

The value of the measure is that it normalises time. A holding kept for three years and one kept for eleven cannot be compared on total growth, because the longer one had more years to work with. Annualising both puts them on the same scale.

What CAGR is not is equally important. It is a description of two numbers that already exist. It is not a return anybody received, not a rate that applied in any particular year, and not a statement about what will happen next. The arithmetic is exact; the interpretation is where nearly all the mistakes live.

Each of the four words is doing a specific job, and the definition falls apart if any of them is dropped.

• Compound— each year’s growth is calculated on the previous year’s ending value, not on the original amount. This is why ₹1,00,000 growing at 10% for two years reaches ₹1,21,000 rather than ₹1,20,000.
• Annual — the result is expressed per year, whatever the actual period was. A change measured over 42 months is still reported as a yearly rate.
• Growth — it measures change in value, in either direction. Growth can be negative, and a negative CAGR is a perfectly ordinary result.
• Rate — it is a percentage rather than an amount, which is what makes it comparable across investments of completely different sizes.

Put together: the compounded, annualised percentage change in a value between two points in time.

Three steps, and only three inputs are ever needed.

1. Divide the final value by the initial value. This gives the growth multiple — ₹2,00,000 ÷ ₹1,00,000 = 2, meaning the value doubled.
2. Take the nth root, where n is the number of years. Over five years that is the fifth root of 2, which is 1.148698. Raising to the power 1 ÷ 5 is the same operation.
3. Subtract one. That leaves 0.148698, or 14.87% once multiplied by 100.

The root is the step that does the real work. It asks what number, multiplied by itself five times, gives 2 — which is precisely the question “what constant annual growth doubles this in five years?”

If your period is in months, convert first by dividing by 12. Forty-two months is 3.5 years, and the formula takes 3.5 directly — there is no need for the duration to be a whole number of years.

The standard form, and the one this calculator implements:

Where:

• Initial Value — the beginning value. It must be greater than zero, because the formula divides by it.
• Final Value — the ending value. It may be lower than the initial value, which gives a negative rate, or zero, which gives exactly −100%.
• Years — the length of the period, which can be fractional. If you have months, divide by 12 first.

Three situations have no answer rather than a wrong one. An initial value of zero divides by zero — there is no rate of growth from nothing to something, since the growth is infinite rather than merely large. A duration of zero raises to the power 1 ÷ 0. And a negative final value would require a fractional root of a negative number, which has no real value. The calculator says so in each case instead of displaying something misleading.

1. Enter the initial value. What the investment, asset or metric was worth at the start of the period. Shorthand is accepted — 50k, 5L and 1.2cr all work.
2. Enter the final value. What it was worth at the end. Make sure both figures are measured the same way: two share prices, or two portfolio values including dividends, but not one of each.
3. Enter the duration. In years or months, whichever matches the figures you have. Getting the unit right matters more than any other single input — see the mistakes section below.
4. Read the CAGR. It updates as you type. The panel also shows absolute growth, total growth percentage and the growth multiple, which together describe the same change in three other ways.
5. Interpret it against something. A rate on its own means very little. Compare it to a benchmark, to inflation over the same period, and to what the risk taken would justify.

Take an initial value of ₹1,00,000, a final value of ₹2,00,000, and a duration of five years.

So the CAGR is 14.87%. The total growth was 100%, the absolute gain was ₹1,00,000, and the growth multiple was 2×. All four figures describe the same change; only the CAGR accounts for how long it took.

Here is what a constant 14.87% would have produced year by year. The first and last figures are the ones entered; the three in between are what the arithmetic implies, not a record of anything that happened:

Notice the growth column rising every year even though the rate never changes. That is compounding: the same percentage applied to a larger base produces a larger amount.

There is no universal answer, and any figure offered as one deserves scepticism. Whether a rate is good depends on several things that a calculator has no way of knowing.

• Asset class. What counts as strong for a debt instrument and what counts as strong for equity are not the same number, because they are not the same risk.
• Risk taken. Two holdings can share a CAGR while one of them swung violently to get there. Growth achieved through far greater volatility is not the same achievement.
• The period measured. A rate calculated across a boom differs from the same holding measured across a downturn. Endpoints matter enormously.
• Inflation over that period. A nominal rate below inflation is a loss of purchasing power however positive it looks.
• A relevant benchmark. The comparison that matters is against what an alternative would have done over the same window, not against a remembered number.
• Your objective. The rate a goal requires and the rate that is prudent to plan around are different questions, and the second is not arithmetic.

This calculator computes the rate. Judging it is a separate exercise, and one this page deliberately does not attempt on your behalf — the figures here are mathematics, not financial advice.

Absolute return is the total change over the whole period, ignoring how long it took. CAGR spreads that same change across the years. The distinction is the single most common source of confusion about growth figures.

Take ₹1,00,000 growing to ₹2,00,000. The absolute return is 100% — the value doubled — and that is true whether it took three years or twenty. The CAGR is not:

• Over 3 years: 25.99% a year
• Over 5 years: 14.87% a year
• Over 10 years: 7.18% a year
• Over 20 years: 3.53% a year

A 100% total increase over ten years does not mean a 100% annual return. It means 7.18% a year, which is a very different proposition — and the gap between those two readings is where a great deal of misleading marketing operates.

Use absolute return when you want to know how much. Use CAGR when you want to know how fast, or when you need to compare holdings kept for different lengths of time.

An annual return is what actually happened in one specific year: the change from 1 April to 31 March, or across any other twelve-month window you choose. CAGR is a single smoothed figure covering the entire period.

In almost every real case, no individual year matched the CAGR. Consider five years of returns of +50%, -30%, +40%, -10%, +20%. The CAGR across those five years is 9.69% — a figure that appears in none of them. Two of those years were losses. The CAGR conceals that entirely.

This is not a defect so much as the point: CAGR is designed to summarise, and summarising means discarding the path. But it does mean a CAGR should never be described as “the return” without qualification, and a smooth-looking annual figure should never be taken as evidence of a smooth ride.

These two are quoted interchangeably far more often than they should be, and they are not the same thing. The arithmetic average adds the yearly returns and divides by the count. CAGR multiplies the growth factors and takes the nth root — a geometric mean rather than an arithmetic one.

Using the same five years of +50%, -30%, +40%, -10%, +20%:

• Arithmetic average: 14% a year
• CAGR: 9.69% a year
• What ₹1,00,000 actually became: ₹1,58,760

The gap is over four percentage points, and only the CAGR reproduces the real ending value. Compounding ₹1,00,000 at the arithmetic average of 14% for five years would give ₹1,92,541, which is not what happened.

The reason is that a loss is taken on a different base than the gain preceding it. Lose 30% after gaining 50% and you do not end up 20% ahead — you end up with 1.5 × 0.7 = 1.05, or 5% ahead. The arithmetic mean has no way to see that; the geometric mean is built around it.

The two agree exactly in one case only: when every year’s return is identical. The more returns vary, the wider the gap, and the arithmetic mean is always the larger of the two — which is why it is the one that tends to get quoted.

Compounding is what makes CAGR a curve rather than a straight line. Each year’s growth is calculated on the previous year’s ending value, so the same percentage produces a larger amount every year.

At an assumed 12% a year, ₹1,00,000 becomes ₹1,76,234 after five years and ₹17,00,006 after twenty-five. Five times the duration produces not five times the growth but roughly 9.6 times the ending value. Over these longer periods the largest part of the final figure is growth on previous growth rather than growth on the original amount.

The same arithmetic explains why annualising is a compressing operation. Spreading a fixed total growth over more years produces a much lower annual rate, because compounding does more of the work — which is why doubling your money is 25.99% a year over three years but only 3.53% a year over twenty.

CAGR is a mathematical representation of this smooth curve. Actual annual returns vary substantially around it, and in the real world almost never trace it. A compound interest calculator models the same growth forward from a rate you set; a SIP calculator does it for money added in instalments.

CAGR is a standard way to describe how a share price moved between two dates as a single annualised figure. Enter the price at the start, the price at the end, and the period between them.

Four things determine whether the answer means what you think it means.

• It does not capture volatility. Two stocks with identical CAGR can have taken entirely different journeys — one steady, one through a crash and a recovery. The rate is blind to everything between the endpoints.
• It does not show the path of returns. The sequence matters a great deal to anyone who might have needed to sell partway through, and CAGR discards it completely.
• Dividends and corporate actions change the answer. A price-only calculation excludes dividends and understates total return. Splits and bonus issues make raw prices incomparable unless you use adjusted figures.
• Historical CAGR does not predict future returns. A rate computed from two past prices carries no claim about the next period whatsoever.

Be deliberate about your two dates as well. Endpoint sensitivity is real: shifting a start date by a few months across a sharp move can change the calculated rate substantially without anything about the underlying holding having changed.

For a lump-sum investment held across a period, CAGR is the correct measure and the one fund factsheets generally use for periods longer than a year. Enter the value at the start and the value at the end — NAV or total holding value, as long as both are measured the same way.

The result depends entirely on the values and the period you enter. Choosing a different start date, or using NAV rather than a value that reflects reinvested dividends, produces a different and equally arithmetically correct figure.

For a SIP, CAGR is the wrong tool and will mislead you. Money invested in instalments has been invested for different lengths of time — the first contribution may have had ten years to grow while the most recent has had one month. A single beginning value and ending value cannot represent that. Use a SIP calculator for instalment investing, and XIRR when you need an annualised rate from a real series of dated cash flows.

Whatever the result, it describes what happened over the window you chose. It makes no claim about future performance.

Outside investing, revenue growth is probably the most common use of CAGR. It annualises the change between two financial years into one figure that can be compared across companies and periods.

Revenue of ₹5 crore growing to ₹12 crore over four years is a CAGR of 24.47%. The inputs are the starting revenue, the ending revenue and the number of years between them — the same three the formula always takes.

Worth keeping clear: this is growth in a business metric, not a return to an investor. A company growing revenue at 24.47% a year is not delivering 24.47% to shareholders, and the two get conflated routinely in presentations. Revenue growth says nothing by itself about margins, cash generation or valuation.

The same calculation works for any quantity measured at two points in time — users, subscribers, units shipped, headcount, output.

Sales figures are rarely comparable in raw form. One product line has three years of history, another has seven; one region started from a small base, another from a large one. Annualising puts them on a single scale.

A line growing from ₹1 crore to ₹2.5 crore over ten years has a CAGR of 9.6%. Another growing from ₹1 crore to ₹2.5 crore over five years has a CAGR of 20.11% — the same total growth at twice the pace, which raw totals would have shown as identical.

Two cautions. Growth from a very small base produces large percentages that are not really comparable to the same percentage on a large base. And a single pair of endpoints can hide a collapse and recovery in between, so a CAGR is a summary to start a conversation with rather than finish one.

ROI — return on investment — is total gain or loss relative to the amount invested, with no reference to time. CAGR annualises that same gain over the period it took.

• ROI = (Final − Initial) ÷ Initial. ₹1,00,000 becoming ₹2,00,000 is an ROI of 100%, whenever it happened.
• CAGR = (Final ÷ Initial)^(1 ÷ Years) − 1. The same doubling is 14.87% a year over five years and 7.18% a year over ten.

ROI answers how much you made. CAGR answers how fast. ROI is the more direct figure when the period is fixed or irrelevant; CAGR is the only one of the two that can fairly compare investments held for different lengths of time.

CAGR takes exactly two values and one period. Built into it is the assumption that a single amount went in at the start and came out at the end, with nothing added or withdrawn in between.

XIRR — extended internal rate of return — handles any number of cash flows on arbitrary dates, weighting each by how long it was actually invested. It solves for the rate at which all those dated flows discount to zero, which is a harder problem with no closed-form solution.

• Lump sum in, lump sum out — both give the same answer, and CAGR is simpler.
• SIP or recurring purchases — CAGR cannot represent it. Each instalment was invested for a different length of time.
• Partial withdrawals or top-ups — XIRR, for the same reason.
• Irregular dates — XIRR, which works from actual dates rather than whole years.

This calculator implements CAGR only. When your situation involves multiple cash flows, the honest answer is that CAGR is the wrong measure rather than an approximate one.

CAGR is a genuinely useful summary, and every one of its uses is constrained by the following.

• It hides year-to-year volatility. Every path between two endpoints gives the same rate. A steady climb and a violent series of crashes and recoveries are indistinguishable.
• It uses only two values. Everything that happened in between is discarded, including the worst moment — which is often the most decision-relevant fact about a holding.
• It does not represent actual annual performance.No year necessarily matched the CAGR, and quoting it as “the annual return” is misleading.
• It ignores intermediate cash flows. Contributions and withdrawals break the assumption the formula rests on. XIRR exists for this.
• It excludes taxes and fees unless they are already reflected in the values entered. A gross CAGR overstates what you actually kept.
• It is nominal, not real. Inflation is not removed. Over long periods the gap between nominal growth and purchasing power is substantial.
• It is sensitive to the endpoints chosen. Moving a start or end date across a market swing can change the result significantly with nothing else having changed.
• Historical CAGR does not guarantee future returns. It carries no predictive content at all.

• Entering months where years belong. By far the most damaging error. Sixty months entered as sixty years turns a 14.87% rate into 1.16%. Use the unit switch rather than converting in your head.
• Confusing total growth with CAGR. A 100% total increase is not a 100% annual rate. Over ten years it is 7.18% a year.
• Treating CAGR as a guaranteed or expected return. It describes two numbers that already exist. Projecting it forward is an assumption you are choosing to make, not a property of the calculation.
• Ignoring intermediate cash flows. Running CAGR on a SIP by using total invested as the initial value produces a figure that means nothing.
• Comparing rates without comparing risk. A higher CAGR earned through much greater volatility is not straightforwardly better.
• Comparing periods that do not overlap. Two investments measured across different market conditions are not really being compared.
• Ignoring inflation. A nominal rate below inflation is a real loss. An inflation calculator converts between the two.
• Ignoring fees and taxes. Gross figures overstate what reached you. Use net values if you want a net rate.
• Mixing measurement bases. A starting price without dividends and an ending value with them is not a valid pair.
• Assuming CAGR describes yearly performance. It describes the endpoints. The year-wise table on this page is explicitly hypothetical for exactly this reason.

The vocabulary that shows up around annualised growth, in plain language.

CAGR is an analytical metric — a way of describing change that already happened, or of stating what change a plan would require. Every use below is one of those two things.