CAGR Calculator

⚡ In shortCAGR — the compound annual growth rate — is the steady yearly rate that would take your investment from its starting value to its current value, and it is the only fair way to compare investments held for different lengths of time. Absolute return simply tells you how much you gained overall: (final − initial) ÷ initial. It ignores time, which makes it misleading — doubling your money is excellent in 3 years and mediocre in 20. CAGR fixes that by annualising the return: it is the nth root of (final ÷ initial) minus one, where n is the number of years. So money that doubles in 5 years has a CAGR of about 14.9%, while doubling in 10 years is about 7.2%. CAGR assumes a single lump sum with no additions or withdrawals — for a SIP or any series of cash flows, XIRR is the right measure instead. It also smooths out the journey: a fund with a 12% CAGR may have swung wildly year to year.

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How it is calculated

Absolute return simply tells you how much you gained overall: (final − initial) ÷ initial. It ignores time, which makes it misleading — doubling your money is excellent in 3 years and mediocre in 20. CAGR fixes that by annualising the return: it is the nth root of (final ÷ initial) minus one, where n is the number of years. So money that doubles in 5 years has a CAGR of about 14.9%, while doubling in 10 years is about 7.2%. CAGR assumes a single lump sum with no additions or withdrawals — for a SIP or any series of cash flows, XIRR is the right measure instead. It also smooths out the journey: a fund with a 12% CAGR may have swung wildly year to year.

Frequently asked questions

What is a good CAGR for equity in India?

Broad Indian equity indices have historically returned roughly 11-14% CAGR over long periods, though any given decade can differ sharply. Debt instruments typically sit around 6-8%. Past returns do not predict future ones.

What is the difference between CAGR and absolute return?

Absolute return is the total percentage gain regardless of time. CAGR converts that into a per-year rate, so investments held for different periods can be compared fairly.

Should I use CAGR for a SIP?

No. CAGR assumes one lump sum invested at the start. For a SIP, where money goes in at many different dates, use XIRR, which accounts for the timing of each instalment.

Does CAGR account for tax or inflation?

No — it is a pre-tax, nominal figure. To judge real wealth creation, subtract inflation and the tax on your gains (for example 12.5% LTCG above ₹1.25 lakh on listed equity).

Related reading

India Law Simplified is an AI-assisted tool, not a substitute for a licensed CA or advocate. Tax rules and limits change with each Finance Act — verify before relying on any figure.