CAGR Calculator

CAGR Calculator: Measure the True Annual Growth of Any Investment

CAGR stands for Compound Annual Growth Rate. It is the single, smoothed rate of return at which an investment would have grown each year if it had compounded steadily from its starting value to its ending value. Real markets are lumpy: a mutual fund may jump 22 percent one year and fall 8 percent the next. CAGR strips out that noise and answers one clean question: on average, per year, how fast did my money actually grow?

This calculator is for anyone comparing investments on equal terms: an equity investor weighing two mutual funds, a founder tracking revenue growth, a saver checking whether a fixed deposit truly beat inflation, or a student learning the time value of money. Because CAGR normalises everything to a per-year figure, you can compare a 3-year lump sum against a 7-year property holding without being misled by the different durations.

The exact formula, in words

CAGR equals the ending value divided by the beginning value, raised to the power of one divided by the number of years, and then you subtract one. Multiply by 100 to express it as a percentage.

• End value is what the investment is worth today.
• Begin value is what you originally invested.
• Years is the exact holding period. If you need extra precision, use the number of days divided by 365.

A fully worked example in rupees

Suppose you invested Rs. 2,00,000 in an equity fund and, five years later, it is worth Rs. 3,50,000. Here is each step:

• Step 1 — Growth ratio: divide end by begin. Rs. 3,50,000 divided by Rs. 2,00,000 equals 1.75. Your money became 1.75 times its original size.
• Step 2 — The exponent: one divided by 5 years equals 0.20.
• Step 3 — Raise to the power: 1.75 raised to the power 0.20 equals approximately 1.1184.
• Step 4 — Subtract one: 1.1184 minus 1 equals 0.1184.
• Step 5 — Convert to percent: 0.1184 times 100 equals 11.84 percent CAGR.

You can verify it in reverse: Rs. 2,00,000 growing at 11.84 percent compounded for five straight years returns to Rs. 3,50,000. Notice that the simple total return here was 75 percent, but the annual compounded rate is only 11.84 percent, not 15 percent (which is what you would wrongly get by dividing 75 by 5). That gap is exactly why CAGR exists.

Rules and edge cases to respect

• CAGR ignores volatility. Two funds can both show 11.84 percent CAGR while one was a smooth ride and the other swung wildly. CAGR tells you the destination, not the turbulence along the way.
• It assumes a single lump sum invested once at the start. If you invest monthly through a SIP, CAGR is the wrong tool — use XIRR, which handles multiple cash flows on different dates.
• Years must be greater than zero. A period under one year cannot be annualised meaningfully; annualising a two-month gain grossly overstates the real rate.
• Negative or zero start values break the maths. CAGR only works when both begin and end values are positive.
• A falling investment gives a negative CAGR. If Rs. 2,00,000 shrinks to Rs. 1,50,000 over five years, the CAGR is negative — the formula still works and correctly shows the annual rate of loss.

Tax treatment in India

CAGR itself is a pre-tax measure — it says nothing about what you keep after the tax department takes its share. Your real, in-hand growth depends on how the gain is taxed:

• Equity funds and listed shares attract long-term capital gains tax when held for more than one year. As of FY 2025-26, long-term equity gains above an annual exemption of Rs. 1,25,000 are taxed at a flat 12.5 percent, while short-term gains (holding of one year or less) are taxed at 20 percent.
• Debt funds, fixed deposits and most other assets are generally taxed at your income-slab rate under current rules, with debt funds purchased on or after 1 April 2023 taxed at slab rates regardless of holding period.
• For a fair comparison, compute a post-tax CAGR by using your net-of-tax ending value. A 12 percent pre-tax CAGR can fall meaningfully once tax is applied.

Always confirm the prevailing rates and exemption limits for the relevant financial year, as these are revised in the annual budget and have changed several times in recent years.

Common mistakes and tips

• Do not average yearly returns. The simple average of annual returns is almost always higher than the true CAGR because it ignores the compounding effect of losses.
• Match the period exactly. Using 5 years when the real gap is 4 years and 8 months quietly overstates your rate.
• Compare like with like. Only pit one CAGR against another when both cover single lump sums; otherwise switch to XIRR.
• Beat inflation, not just zero. An 11.84 percent CAGR is only worthwhile if it comfortably exceeds inflation over the same span — that is your real growth.
• Reinvest to actually earn compounding. CAGR assumes gains stay invested; withdrawing dividends or interest along the way changes the real outcome.