What is CAGR and why does it matter?

CAGR (Compound Annual Growth Rate) is the rate at which an investment would have grown if it grew at a steady annual rate, compounded annually. It is the most useful single number for comparing investments held over different time periods — for example, comparing a 3-year mutual fund return against a 5-year FD.

What is the formula for CAGR?

CAGR = (Final Value ÷ Initial Value)^(1÷n) − 1, where n is the number of years. Expressed as a percentage, multiply by 100. For example, an investment that grew from ₹1 lakh to ₹1.61 lakh in 5 years has a CAGR of (1.61)^(1/5) − 1 = 10%.

What is the difference between CAGR and absolute return?

Absolute return tells you the total percentage gain (e.g. 60% over 5 years). CAGR annualises that gain so you can compare investments across different time horizons (e.g. 60% absolute return over 5 years = 9.86% CAGR per year). CAGR is a fairer yardstick for comparison.

What is a good CAGR for a mutual fund in India?

In India, a CAGR of 12–15% over 10+ years from a diversified equity mutual fund is considered good. The Nifty 50 has delivered approximately 12–13% CAGR over the past 20 years. Actively managed large-cap funds typically aim to beat this by 1–3%.

Can CAGR be negative?

Yes. If your final value is less than the initial value, the CAGR will be negative, indicating a loss. A CAGR of −10% means the investment lost 10% of its value each year on a compounded basis.

CAGR Calculator

Calculate the Compound Annual Growth Rate of your investments

Investment Details

Initial Investment Value

Final Investment Value

Investment Period (Years)

CAGR Result

Annual Growth Rate

How CAGR is Calculated

Formula:

CAGR = (Final Value / Initial Value)^(1/Years) - 1

CAGR (Compound Annual Growth Rate) measures the mean annual growth rate of an investment over a specified time period longer than one year. It represents one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time.