Find the compound annual growth rate of an investment, revenue or salary between two points in time.
CAGR formula
CAGR = (Ending value ÷ Starting value)^(1 ÷ years) − 1CAGR (compound annual growth rate) is the steady yearly rate that would take the starting value to the ending value. It smooths out ups and downs, which makes it the standard way to compare mutual funds, stocks, revenue and salaries.
Example
₹1,00,000 → ₹2,50,000 in 5 years: (2.5)^(1/5) − 1 = 20.1% CAGR, even though the absolute return is 150%.
CAGR vs absolute return
Absolute return ignores time: 150% over 5 years and 150% over 15 years look the same. CAGR shows they are 20.1% and 6.3% a year. Always compare investments on CAGR (or XIRR when there are multiple cash flows).
Project forward with the lumpsum calculator.
How to use the CAGR calculator
- Enter the starting value — the amount you invested or the first-year figure (sales, users, price).
- Enter the ending value today.
- Enter the number of years between the two values (use decimals for part-years: 3 years 6 months = 3.5).
- Read the CAGR — the single yearly growth rate that would turn the start value into the end value.
Step-by-step: ₹1,00,000 grew to ₹2,10,000 in 6 years
CAGR = (End ÷ Start)1 ÷ years − 1- Divide: 2,10,000 ÷ 1,00,000 = 2.1.
- Take the 6th root: 2.11/6 = 1.1316 (on a phone calculator: 2.1 ^ (1 ÷ 6)).
- Subtract 1 and convert to percent: 0.1316 → 13.16% a year.
- Check: 1,00,000 × 1.13166 ≈ 2,10,000 ✓
Absolute return here is 110%, but it took 6 years — CAGR tells you that equals 13.16% a year, which you can compare with an FD at 7%.
Worked examples
| Situation | Working | Answer |
|---|
| Mutual fund ₹5 lakh → ₹8 lakh in 4 years | (8 ÷ 5)0.25 − 1 | 12.47% |
| Share bought at ₹50, now ₹180 after 10 years | (180 ÷ 50)0.1 − 1 | 13.67% |
| Flat bought for ₹40 lakh, sold at ₹70 lakh after 8 years | (70 ÷ 40)0.125 − 1 | 7.25% — barely above an FD |
Tips and common mistakes
- CAGR smooths out ups and downs — a fund with 13% CAGR may have fallen 20% in one year and risen 40% in another.
- For SIPs or investments made at different times CAGR is misleading; XIRR is the right measure. CAGR suits one-time investments.
- Compare a property's CAGR after adding stamp duty, brokerage and maintenance — the 'doubled in 8 years' story often turns out to be 7–8% a year.
- A reverse check: use the Lumpsum Calculator with the CAGR as the rate and confirm it reproduces the ending value.
Frequently asked questions
What is a good CAGR?
For equity mutual funds, 12–15% over 10+ years is good; for FDs 6–8% is normal. For a business, anything above inflation plus 5–10% is healthy.
How do I calculate CAGR in Excel?
=(End/Start)^(1/Years)-1, or use the RRI function: =RRI(years, start, end).
Is CAGR the same as XIRR?
No. CAGR assumes one investment and one exit. XIRR handles many cash flows at different dates, such as SIPs.