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CAGR · Absolute Return · Years to Double · Inflation-adjusted Real CAGR · Exact, not estimated
CAGR (Compound Annual Growth Rate) is the annualized rate at which an investment would have grown if it had compounded at a steady rate every year, from its initial value to its final value. It is the standard way to measure and compare investment performance across different assets and time periods — used for mutual funds, stocks, business revenue, and any figure that changes over time. Unlike a lumpsum calculator, which projects a future value forward from an assumed rate, a CAGR calculator works backward — it takes two known values and tells you the effective annual rate that connects them.
CAGR is calculated using the following formula:
| Variable | Meaning | How to find it | Example |
|---|---|---|---|
| Initial Value | The starting amount or investment value | Your purchase price or opening investment | ₹1,00,000 |
| Final Value | The ending amount or current value | Current market value or redemption amount | ₹2,00,000 |
| n | Number of years between the two values | The holding period | 5 years |
| CAGR | Annualized compound growth rate | Calculated output | 14.87% p.a. |
Inputs: Initial Value = ₹1,00,000 | Final Value = ₹2,00,000 | n = 5 years
Notice that the investment doubled (a 100% absolute return) but the annualized CAGR is only 14.87% — this gap grows wider the longer the holding period, which is exactly why CAGR, not absolute return, is the right metric for comparing investments held for different durations. Use a lumpsum calculator if you want to project a future value forward using an assumed CAGR instead.
The bigger the multiple your investment grew by, the higher the CAGR — but this relationship is not linear once you factor in time. A 2x return over 5 years and a 2x return over 10 years produce very different CAGRs (14.9% vs 7.2%).
The single biggest lever in CAGR calculations. The same total gain, spread over a shorter period, produces a dramatically higher CAGR — which is why CAGR is only meaningful when the time period is stated alongside it.
CAGR is highly sensitive to the exact initial and final values chosen — starting from a market low or ending at a market peak can significantly inflate the calculated CAGR, even though it does not reflect a repeatable underlying rate.
A positive nominal CAGR can still represent a loss in real purchasing-power terms if inflation over the same period was higher. Always check the Real CAGR for a true picture, especially over long holding periods.
These two metrics are the most commonly confused numbers in investing. Both describe the same outcome, but answer different questions.
| Metric | What it tells you | Formula | Best used for |
|---|---|---|---|
| Absolute Return | Total % gain over the entire holding period, with no time adjustment | (Final − Initial) ÷ Initial × 100 | Quick headline number; comparing returns over the exact same period |
| CAGR | The annualized, smoothed-out yearly growth rate | (Final ÷ Initial)^(1/n) − 1 | Comparing investments held for different durations; true year-on-year performance |
Once you calculate your CAGR, it helps to know roughly where it sits relative to common asset classes. These are broad historical averages, not guarantees — actual returns for any specific fund or stock can vary significantly.
| Asset Class | Approx. Long-Term CAGR | Notes |
|---|---|---|
| Savings Account | 3–4% | Highly liquid, near-zero risk |
| Fixed Deposits / Debt Funds | 6–7% | Low risk, predictable |
| PPF / EPF | 7–8.2% | Government-backed, tax-free (EEE) |
| Balanced / Hybrid Mutual Funds | 9–10% | Mix of equity and debt |
| Large-Cap Equity Funds / Nifty 50 | 11–13% | Long-term index average |
| Mid & Small-Cap Equity Funds | 13–16% | Higher volatility, higher long-term potential |
CAGR = (Final Value ÷ Initial Value)^(1/n) − 1, where n is the number of years between the two values. Multiply the result by 100 to express it as a percentage. For example, ₹1,00,000 growing to ₹2,00,000 over 5 years gives a CAGR of approximately 14.87%.
Absolute return is the total percentage gain over the entire holding period with no time adjustment. CAGR is the annualized, smoothed-out yearly growth rate. Absolute return always looks larger than CAGR for any period beyond a year — for instance, a 100% absolute return over 5 years corresponds to a CAGR of about 14.87%, not 20%. Always use CAGR to compare investments held for different durations.
Yes. If the final value is lower than the initial value, the calculated CAGR will be negative, indicating that the investment lost value on an annualized basis over the period measured. A negative CAGR does not necessarily mean every individual year was negative — it reflects the overall annualized trend between the two points.
This depends on the asset class. As a rough long-term historical guide, debt/FD-like instruments have delivered around 6–7% p.a., balanced or hybrid funds around 9–10% p.a., large-cap equity funds around 11–13% p.a. (broadly tracking the Nifty 50), and mid/small-cap funds 13–16% p.a. over long periods — though none of these are guaranteed and actual results vary by fund and time period.
Absolute return measures total growth over the whole period without accounting for time, while CAGR spreads that same growth evenly across each year using compounding math. Because compounding math requires a smaller annual rate to reach the same total over multiple years (the effect compounds), CAGR is mathematically always less than or equal to the absolute return whenever the holding period exceeds one year and the return is positive.
Not directly. CAGR assumes a single lump-sum invested at the start and a single value at the end. For investments made in installments — like a SIP — the correct annualized measure is XIRR, which accounts for cash flows entering at different points in time. Use the SIP calculator to project SIP growth using an assumed annual rate instead.
The CAGR calculated from raw rupee values is a nominal rate — it does not account for the loss of purchasing power over time. The Real CAGR, calculated using the Fisher equation ((1 + nominal) ÷ (1 + inflation) − 1), shows your actual growth in purchasing-power terms. A positive nominal CAGR can still be a negative real CAGR if inflation was higher over the same period.
A CAGR calculator is mathematically exact given the initial value, final value, and duration you enter — there is no estimation involved, unlike future-value calculators that rely on an assumed rate. The only source of inaccuracy is the inputs themselves: make sure the initial and final values and the exact number of years are correct.
The Rule of 72 (or more precisely, ln(2) ÷ ln(1+r)) is a quick way to estimate how many years it takes an investment to double at a given CAGR — roughly, divide 72 by the CAGR percentage. At a 12% CAGR, for example, an investment doubles in approximately 6 years. This calculator shows the exact years-to-double figure alongside your calculated CAGR.
CAGR is highly sensitive to the exact start and end dates chosen because it depends only on those two values, not the path in between. Starting the calculation right before a market dip, or ending it right after a rally, can significantly skew the result. This is why fund houses are required to show CAGR/returns across multiple standard periods (1-year, 3-year, 5-year, since-inception) rather than a single cherry-picked window.
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