Calculate Compound Annual Growth Rate (CAGR) to understand your investment's average annual growth.
Enter your investment values to calculate CAGR
Calculate the Compound Annual Growth Rate (CAGR) to understand your investment's average annual growth.
Use the slider or type directly to input the initial investment amount or starting value of your investment.
Adjust the slider or type directly to input the final value of your investment after the investment period.
Use the slider or type directly to specify the number of years (supports decimal values like 2.5 for 2 years and 6 months).
The CAGR percentage is calculated automatically and displayed instantly as you adjust the values.
Where Ending Value = Final investment value, Beginning Value = Initial investment value, and N = Number of years. The result is multiplied by 100 to get the percentage.
CAGR, or Compound Annual Growth Rate, is a financial metric that represents the average annual growth rate of an investment over a specified time period. Unlike simple returns, CAGR smooths out volatility and provides a single, standardized growth rate figure that makes it easy to compare different investments.
CAGR is particularly useful for evaluating long-term investments like mutual funds, stocks, bonds, or real estate. It shows what the average annual return would have been if the investment grew at a steady rate, even though actual returns may have varied significantly from year to year.
Absolute Return simply tells you how much your investment grew in total percentage terms (e.g., 50% over 3 years). It doesn't account for time. CAGR, on the other hand, tells you the annual rate.
Example: If an investment doubles in 3 years, absolute return is 100%. But is that good? CAGR tells you it grew at ~26% per year, which is easier to benchmark against other annual rates like FD interest (6-7%) or inflation (5-6%).
If you prefer using Excel, you can calculate CAGR using the `RRI` function or a manual formula:
Benchmarking: Compare your portfolio's performance against indices like Nifty 50 or S&P 500.
Goal Planning: Estimate how much your current savings will grow to in the future based on historical CAGR of asset classes.
Reality Check: It filters out the 'noise' of short-term market fluctuations to show the true underlying growth trend.
While powerful, CAGR does not show volatility or risk. An investment could drop 50% in one year and rise 100% in the next, showing a decent CAGR but hiding the rollercoaster ride. Always look at CAGR alongside standard deviation or other risk metrics.
To give you perspective, here are historical CAGR figures for different asset classes in India (approx. 10-15 year averages):
Do not use CAGR for investments with uneven cash flows (like SIPs). For SIPs, XIRR (Extended Internal Rate of Return) is the correct metric. CAGR only works for lump sum investments where you have one initial value and one final value.
Step 1: Determine Target Amount
First, decide how much money you need (e.g., $1 Crore for retirement).
Step 2: Check Current Savings
Identify your current investment value (e.g., $20 Lakhs).
Step 3: Estimate Time
Determine how many years you have left (e.g., 15 years).
Step 4: Calculate Required CAGR
Use this calculator! Enter $20L as Beginning, $1Cr as Ending, and 15 years. The result (11.4%) tells you the return your investments must generate annually to reach your goal. If your current portfolio is doing 8%, you know you need to take more risk or save more.