Finance & Banking CalcyZone Calculator

CAGR Calculator

Calculate the compound annual growth rate of an investment, revenue or any value over time.

CAGR

14.87%

Absolute return

100%

Growth multiple

2×

Step-by-step working

CAGR = (200000 / 100000)^(1/5) − 1 = 14.87%

Mathematical Formula

CAGR = (End / Start)^(1 / years) − 1.

Overview & Explanation

CAGR is the constant yearly rate that would turn the start value into the end value.

How It Works

Divide end by start.
Take the 1/years root.
Subtract 1.

Practical Applications

Comparing mutual fund or stock returns.
Business revenue growth.

CAGR versus average annual return

The simple average of yearly returns overstates growth when returns vary. An investment that rises from ₹100 to ₹150 (+50%) and then falls to ₹120 (−20%) has an average return of 15% a year, but its CAGR is √(120 ÷ 100) − 1 ≈ 9.5%. CAGR is the rate that, applied every year, turns the starting value into the ending value, so it is the fairer figure for comparing funds or businesses. It still hides volatility, so look at the year-by-year path too.

What CAGR tells you

Compound annual growth rate is the steady yearly rate that would take a value from its starting level to its ending level over a period. The formula is CAGR = (ending value ÷ starting value)^(1 / years) − 1. It smooths out the ups and downs of real returns into one comparable number.

CAGR is the fairest way to compare investments held for different lengths of time, or to check a fund's long-term performance against an index.

Worked example

An investment grew from 2,00,000 to 3,50,000 in 4 years. The ratio is 1.75, and 1.75^(1/4) = 1.1502, so CAGR is about 15.0 percent a year. Note that the simple average (75 percent ÷ 4 = 18.75 percent) overstates the true yearly growth because it ignores compounding.

What CAGR hides

CAGR only looks at the first and last values. Two investments can have the same CAGR while one was smooth and the other crashed and recovered, so look at volatility too. CAGR also ignores money added or withdrawn during the period; for SIPs or irregular cash flows, XIRR is the right measure.