CAGR Calculator - Compound Annual Growth Rate: Complete Guide
A CAGR Calculator (Compound Annual Growth Rate Calculator) helps you measure the true annual growth rate of an investment over multiple years, smoothing out volatility to give a single representative return figure. CAGR is widely used by investors, analysts, and businesses to compare investment performance, evaluate business growth, and benchmark mutual fund returns. BudgetDose's free CAGR calculator works instantly — enter starting value, ending value, and years to get precise CAGR.
What is CAGR (Compound Annual Growth Rate)?
CAGR (Compound Annual Growth Rate) is the rate at which an investment grows from its beginning value to its ending value over a specified time period, assuming profits are reinvested at the end of each period.
CAGR Formula: CAGR = (Ending Value / Beginning Value)^(1/Years) – 1
Example: An investment that grew from ₹1 lakh to ₹3 lakhs in 5 years has a CAGR of:
(3,00,000 / 1,00,000)^(1/5) – 1 = 3^0.2 – 1 = 24.57%
This means the investment grew at an equivalent annual rate of 24.57% — even though the actual year-by-year returns may have varied significantly.
CAGR vs Absolute Return vs XIRR
Understanding the difference between these metrics is crucial for investors:
- Absolute Return: Total % gain regardless of time. ₹1L → ₹3L = 200% absolute return. Doesn't account for time.
- CAGR: Annualised return assuming compounding. Better for comparing investments of different durations.
- XIRR: Used when cash flows are irregular (like SIP investments). Most accurate for mutual fund return calculation.
For lumpsum investments, CAGR is the right metric. For SIP/periodic investments, always use XIRR.
Benchmark CAGR Returns in India
Understanding what constitutes a good CAGR helps you evaluate investments:
- Savings account: 3–4% CAGR
- Fixed Deposit: 6–7.5% CAGR
- PPF: 7.1% CAGR
- Debt Mutual Funds: 6–8% CAGR
- Nifty 50 Index (15-year): ~13% CAGR
- Large-cap Mutual Funds: 12–15% CAGR
- Mid-cap Mutual Funds: 15–18% CAGR
- Small-cap Mutual Funds: 16–22% CAGR (with higher volatility)
Any investment promising more than 18–20% CAGR consistently should be viewed with skepticism — it likely involves higher risk than disclosed.
Pro Tips
- ✓Use CAGR to compare mutual fund performance — always compare over 5, 10, 15-year periods
- ✓Never judge a fund by 1-year returns — CAGR over 7+ years is meaningful
- ✓A CAGR below inflation (6%) means you are losing real purchasing power
- ✓Business revenue CAGR of 20%+ over 5 years is a strong indicator of a quality growth company
- ✓For Nifty 50, historical 20-year rolling CAGR has never been negative — patience pays