CAGR Calculator – Compound Annual Growth Rate
Calculate the compound annual growth rate (CAGR) of an investment between two values over a period of years. Enter the starting value, ending value, and duration to compute the annualized return.
CAGR Calculator Form
CAGR Formula
The Compound Annual Growth Rate (CAGR) is the annualized average rate of return of an investment between two points in time. It smooths out volatility and shows the constant rate at which the investment would have grown each year to reach the ending value from the starting value.
Formula (mathematical):
CAGR = (Ending Value ÷ Starting Value)1 / n − 1
Where:
- Starting Value = Value at the beginning of the period
- Ending Value = Value at the end of the period
- n = Number of years
- CAGR = Compound annual growth rate (expressed as a decimal in the formula; multiply by 100 for percent)
Use this formula to compare returns across investments with different durations or to convert total returns into an annualized rate.
CAGR vs Absolute Return
| Metric | What it Shows |
|---|---|
| CAGR | Smoothed annual growth rate over the period |
| Absolute Return | Total percentage gain between start and end |
The CAGR calculator converts a total return into an annualized rate. It is especially useful when you want to compare investments of different lengths (for example, a 3-year holding vs a 7-year holding). CAGR hides year-to-year volatility and represents the steady growth rate that would lead from the starting value to the ending value over the specified number of years.
When to use this calculator
Use this calculator to compare historical performance, evaluate investment growth, or present a single growth metric for reporting. It is commonly used for mutual funds, stocks, business revenues, or any scenario where an annualized growth rate is helpful.
How it works (plain explanation)
The calculator divides the ending value by the starting value, takes the nth root (where n is the number of years), and subtracts one to yield the annualized rate. For example, if an investment grows from ₹100,000 to ₹180,000 in 5 years, CAGR = (180000 / 100000)^(1/5) − 1 ≈ 0.1216 → 12.16% per year.
Benefits and limitations
CAGR is simple and intuitive for comparisons, but it does not show volatility, drawdowns, or interim cash flows. If there are additional contributions or withdrawals during the period, CAGR does not account for them — use XIRR or time-weighted returns for cash flow-sensitive calculations.
Frequently asked questions
What does CAGR show? CAGR shows the average annual growth rate of an investment assuming it grows at a steady rate each year.
Is CAGR the same as absolute return? No — absolute return measures total gain, while CAGR annualizes that gain over the holding period.
Can CAGR be negative? Yes — if the ending value is lower than the starting value, CAGR will be negative, indicating an annualized decline.
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Disclaimer: This calculator is for educational purposes only and does not constitute financial advice. Always consult a qualified advisor for investment decisions.