Key assumptions
CAGR reduces an entire holding period into one annualized rate using only the starting value, ending value, and time held. It assumes a smooth compounding path even if the actual journey was volatile.
CAGR Calculator
Derive CAGR from start value, end value, and holding period.
How to use CAGR effectively
- 1Compare CAGR only for similar time periods — a 5-year CAGR and a 10-year CAGR are not directly comparable.
- 2Always check CAGR alongside volatility or maximum drawdown — two funds with the same CAGR can have very different risk profiles.
- 3Use CAGR to evaluate fund performance against the benchmark index over the same period — consistent outperformance matters more than one good year.
- 4Remember that CAGR hides the journey — a fund that dropped 40% and recovered looks the same as one that grew steadily.
- 5For stocks, check at least 5-year CAGR to smooth out short-term noise and market cycles.
- 6CAGR doesn't account for dividends unless you include them in the ending value — use total return values for a complete picture.
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What is this?
Compound annual growth rate smooths a starting and ending value into one yearly figure. Investors use it to compare stocks, funds, or portfolios over similar horizons even when year-by-year returns bounce around.
Formula
CAGR = (Ending value / Beginning value)^(1/years) − 1. Beginning value must be positive.
How to use
Enter beginning amount, ending amount, and years held. Interpret the result as an annualized growth rate for that window only.
FAQ
What is CAGR?
CAGR is the constant annual rate that would grow the beginning value to the ending value over the holding period, assuming compounding—useful for comparing investments of different lengths.
Does CAGR include dividends or SIPs?
This simple calculator assumes a single beginning and ending total. For multiple cash flows, use XIRR-style tools; for regular investments, use the SIP calculator.
Why can CAGR be misleading?
It smooths volatile paths into one number. Two portfolios can have the same CAGR with very different drawdowns and risk.
What period should I use for years?
Use the actual calendar years (or fractional years) the money was invested. Rounding short periods can skew CAGR.
Is CAGR the same as annual return?
Not always. “Annual return” is used loosely; CAGR is specifically the geometric mean growth rate between two values over n years.
Deeper guide
Use these notes to stress-test the calculator, understand what drives the result, and choose the right tool for the decision you are making.
Worked example
If an investment grows from 1 lakh to 2 lakh over 6 years, the CAGR is the single annual rate that would turn 1 lakh into 2 lakh over that span. That makes it easier to compare with another investment held for a different number of years.
How to interpret the result
Use CAGR as a comparison metric, not a full risk metric. Two investments can show the same CAGR even if one was relatively stable and the other experienced deep drawdowns along the way.
When to use this vs Stock P&L
Use CAGR for multi-year annualized performance comparisons. Use Stock P&L for a direct trade-level profit or loss view when you care about absolute gain, percentage return, and charges on a specific transaction.