How do I calculate CAGR?
CAGR, the compound annual growth rate, is calculated as (final value divided by initial value) raised to the power of 1 divided by the number of years, minus 1, then multiplied by 100 for a percentage. Enter the starting value, ending value and years in FixDoks's CAGR Calculator to see the CAGR, absolute return and growth multiple.
CAGR Calculator at a glance
| Inputs | Initial value, final value or CAGR, years |
|---|---|
| Output | CAGR percentage, absolute return, growth multiple |
| Processing | In your browser; your files are not uploaded |
| Price | Free |
| Works on | Chrome, Edge, Safari and Firefox on Windows, Mac, Android and iPhone |
How to use CAGR Calculator
- Choose Find CAGR or Find final value.
- Enter the initial value and either the final value or the CAGR.
- Enter the duration in years. Decimals such as 2.5 are fine.
- Read the CAGR, absolute return and growth multiple.
What is CAGR?
CAGR, the compound annual growth rate, is the steady yearly rate at which a value would have to grow to get from its starting point to its ending point. Real investments rise and fall from year to year. CAGR smooths that path into one number, which makes it easy to compare a stock, a mutual fund, a property or a company's revenue over different periods.
What is the CAGR formula?
CAGR = (Final value ÷ Initial value)1 ÷ years − 1
Multiply by 100 to get a percentage. To go the other way, the final value is Initial value × (1 + CAGR)years.
Worked example
You invested ₹1,00,000 and it is worth ₹2,50,000 after 5 years.
- Final ÷ Initial = 2.5
- 2.51/5 = 2.50.2 = about 1.2011
- CAGR = 1.2011 − 1 = 0.2011, or about 20.11% a year
The absolute return is 150%, because the value rose by 1.5 times the amount invested. Absolute return ignores time, so a 150% gain over 5 years and over 15 years look the same. CAGR shows the difference: 20.1% a year against about 6.3% a year.
CAGR vs average return
The simple average of yearly returns can mislead. If an investment gains 50% one year and loses 50% the next, the average is 0%, but ₹100 becomes ₹150 and then ₹75. CAGR over the two years is about −13.4%, which matches what actually happened to your money.
CAGR vs XIRR
CAGR is meant for a single amount invested at the start. If you invested in instalments, such as a SIP, or withdrew money along the way, use XIRR instead, which accounts for the date of every cash flow. Mutual fund statements in India usually show XIRR for SIP investments and CAGR for lump sums.
Where is CAGR used?
- Comparing mutual fund or index returns over 3, 5 and 10 years.
- Measuring growth in revenue, profit or users for a business.
- Estimating how fast house prices or gold have grown in a city.
- Setting a target: how fast must savings grow to reach a goal in a set time.
CAGR describes the past or a target. It says nothing about the ups and downs along the way, so look at volatility too before comparing two investments.
Results are estimates for planning. Your bank, fund house or the tax department may round differently or apply extra charges, so check the final figure with them.