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How to use the cagr calculator
- 1Enter what the investment was worth at the start.
- 2Enter what it is worth now.
- 3Enter how many years passed — part years are fine.
- 4Read the CAGR, and compare it against the total return shown beside it.
Why the total return figure misleads
An investment that grew from ₹1,00,000 to ₹2,00,000 has returned 100%. That number tells you almost nothing on its own, because it says nothing about how long it took. Doubling in three years is exceptional; doubling in twenty is mediocre.
CAGR fixes that by expressing the growth as a constant annual rate: the rate at which the money would have had to grow every year, compounding, to arrive where it did. Doubling over ten years is a CAGR of 7.18%. Over three years it is 26%. Over twenty it is 3.5%. Same total return, three completely different investments.
The formula is CAGR = (ending ÷ beginning)^(1 ÷ years) − 1. The calculator shows the total return alongside so the gap between the two is visible, because the total figure is the one advertisements quote and the annual figure is the one that lets you compare anything to anything else.
CAGR is not the average of the yearly returns
This is the most consequential misunderstanding about returns, and the example that makes it obvious is worth committing to memory. An investment gains 50% in year one and loses 50% in year two. The average of those returns is zero. The actual outcome is a 25% loss: ₹100 becomes ₹150, then ₹75.
The CAGR is −13.4%, and that is the truthful figure. The arithmetic average of returns systematically overstates what actually happened to the money, and the more volatile the returns, the wider the overstatement. A fund quoting its average annual return is telling you something less useful than one quoting its CAGR.
The reason is that percentage gains and losses are not symmetric. A 50% fall requires a 100% rise to recover from. This asymmetry is also why avoiding large losses matters more to a long-run result than capturing large gains, and why CAGR — which is a geometric mean, not an arithmetic one — is the correct summary statistic.
What CAGR hides
CAGR is a smoothed number and it deliberately discards the journey. Two investments with an identical 12% CAGR may have travelled completely differently: one grinding steadily upwards, the other doubling, halving and doubling again. If you might need the money at a moment not of your choosing, that difference is the one that matters.
It also assumes a single lump sum in and a single lump sum out. If you added money along the way — which is what anyone running a SIP has done — CAGR is simply the wrong tool, because it cannot know when each contribution arrived. The right measure there is XIRR, which weights each cash flow by how long it was invested. Comparing a SIP's outcome to a CAGR benchmark overstates the SIP's apparent return, sometimes substantially.
And it is entirely backward-looking. A fund's ten-year CAGR describes what happened to someone who invested ten years ago, under conditions that no longer exist. It is evidence, not a forecast, and the gap between those two things is where most disappointment in investing comes from.
Using it to compare sensibly
Compare like with like. A CAGR is only meaningful against another CAGR measured over the same period, because different periods contain different market conditions. A fund's stellar five-year CAGR measured from the bottom of a crash is not evidence of skill.
Compare against the alternative you actually had. For most Indian investors the honest benchmarks are a fixed deposit rate, inflation, and a broad index fund over the same window. A 9% CAGR is excellent against a 6% FD, unremarkable against a 12% index, and roughly break-even against 6% inflation plus tax.
And compare after costs and tax. Fund returns are usually quoted net of expenses but before tax; a fixed deposit's headline rate is before tax entirely. Two products with the same CAGR can leave you with visibly different amounts once the tax treatment is applied.
Frequently asked questions
What is the CAGR formula?
CAGR = (ending value ÷ beginning value)^(1 ÷ number of years) − 1, expressed as a percentage. It is the constant annual rate that would have produced the observed growth.
Is CAGR the same as the average annual return?
No, and the difference matters. +50% followed by −50% averages zero but is actually a 25% loss — a CAGR of −13.4%. The arithmetic average overstates the real outcome, and the more volatile the returns, the wider the gap.
Can I use CAGR for a SIP?
No. CAGR assumes one amount in and one amount out. A SIP has many contributions made at different times, so the correct measure is XIRR, which weights each cash flow by how long it was invested.
What is a good CAGR?
Only meaningful against an alternative. In India, roughly: a fixed deposit is around 6–7%, long-run broad equity indices around 11–13%, and inflation around 5–6%. A return below inflation is a real-terms loss however positive it looks.
Does CAGR account for volatility?
No. It is a smoothed figure that discards the path entirely. Two investments with the same CAGR may have had completely different journeys, which matters if you might need the money at short notice.
Is my data uploaded?
No. Everything is calculated in this browser tab.