What is CAGR and how is it calculated?

CAGR (Compound Annual Growth Rate) is the rate at which an investment grows annually, assuming profits are reinvested. Formula: CAGR = (Ending Value / Beginning Value)^(1/Years) - 1. Example: ₹1 Lakh growing to ₹2.5 lakh in 5 years → CAGR = (2.5)^(0.2) - 1 = 20.11% per year.

What is a good CAGR for mutual funds in India?

For equity mutual funds in India: Large-cap funds targets 10-12% CAGR, Mid-cap 12-15%, Small-cap 15%+ (with higher risk). Index funds tracking Nifty 50 have delivered ~11% CAGR over the last 20 years. For debt funds, 6-8% CAGR is considered good. Compare any mutual fund's CAGR against its benchmark index and category average — if it consistently beats both, it's a good fund.

Should I use CAGR or XIRR for SIP returns?

Always use XIRR for SIP returns, not CAGR. CAGR is designed for single (lumpsum) investments — one entry, one exit. A SIP has multiple purchases at different dates, so each installment has a different time horizon. XIRR calculates the return considering all cash flows and their exact dates, giving the true annualised return. Using CAGR for SIP will always show an incorrect (usually inflated) number. Most fund houses and apps like Groww use XIRR for SIP return display.

What are the limitations of CAGR?

CAGR has 4 key limitations: (1) It ignores volatility — a 9.54% CAGR could be a smooth 9.5% every year or extreme +50%/-20% oscillations. (2) It's wrong for SIPs and multiple investments — use XIRR instead. (3) It doesn't account for taxes, expense ratios, or inflation when comparing across asset classes. (4) Past CAGR does not guarantee future returns — mutual fund performance is market-linked.

How is CAGR different from absolute return?

Absolute Return = (Final - Initial) / Initial × 100. It tells you total % gain but ignores time. CAGR = (Final/Initial)^(1/years) - 1. It tells you annualised % gain, making time-period comparison fair. Example: 80% absolute return over 5 years = 12.47% CAGR. Same 80% over 10 years = only 6.05% CAGR. Without CAGR, it's impossible to compare investments held for different durations.

Can I use CAGR to compare stocks with Nifty 50?

Yes — this is one of the best uses of CAGR. Calculate your stock's CAGR over 3 and 5 years, then compare it to Nifty 50's CAGR over the same period. If your stock's 5-year CAGR is 14% vs Nifty's 11%, the stock has outperformed. If it's 8%, you would have been better off in an index fund. This is how professional fund managers benchmark performance (called 'alpha').

What does 20% CAGR mean?

A 20% CAGR means your investment doubles approximately every 3.6 years (using Rule of 72: 72 ÷ 20 = 3.6). At 20% CAGR: ₹1 Lakh → ₹2.49 lakh in 5 years, ₹6.19 lakh in 10 years, ₹38.34 lakh in 20 years. Very few consistent investors achieve 20%+ CAGR long-term — Warren Buffett's Berkshire has averaged ~20% CAGR over 58 years, considered the best ever achieved at scale.

How do I calculate CAGR of a mutual fund?

To calculate a mutual fund's CAGR: (1) Note the NAV on the date you invested (Beginning Value). (2) Note the current NAV or redemption NAV (Ending Value). (3) Count the years held. (4) Apply: CAGR = (45/20)^(1/6) - 1 = 14.5%. Note: This works for lumpsum. For SIP, use XIRR.

How do I calculate CAGR in Excel?

You can calculate CAGR in Excel using the RRI function. The formula is `=RRI(nper, pv, fv)`. For example, if you invested ₹1000 (pv), it grew to ₹5000 (fv), over 10 years (nper), you would type `=RRI(10, 1000, 5000)`. Once you hit enter, format the cell as a Percentage. Alternatively, you can explicitly type the formula: `=(FV/PV)^(1/Years)-1`.

CAGR Calculator (2026): Compound Annual Growth Rate Check...

The Benchmark Rule.

CAGR is the only "honest" rate of return. It removes the noise of volatility to show you the true annual growth of your wealth.

Apple-to-Apple

Use CAGR to compare Real Estate, Equities, and FDs on a level playing field.

The Volatility Shield

Unlike absolute returns, CAGR accounts for the time value of money precisely.

What is CAGR? Compound Annual Growth Rate (CAGR) is the rate at which an investment grows from its beginning value to its ending value — assuming profits are reinvested each year. Unlike simple average returns, CAGR accounts for compounding, making it the most accurate single-number representation of investment performance over time.

For example, if your ₹1 lakh grew to ₹2 lakh in 5 years, the absolute return is 100% — but the CAGR is just 14.87% per year. Our CAGR Calculator instantly computes this for any investment.

How CAGR Is Calculated

CAGR uses the beginning value, ending value, and number of years to compute the geometric mean return. It completely ignores the ups and downs between start and end — it only cares about where you started and where you ended.

CAGR = (Ending Value / Beginning Value)^(1/n) - 1

Where:

• Ending Value: Final value of investment at redemption
• Beginning Value: Initial investment / purchase value
• n: Number of years the investment was held
• Example: ₹1 Lakh → ₹2,75,000 in 5 years → CAGR = (2.75)^(1/5) - 1 = 22.4%

Accurate Cross-Asset Comparison: Compare a 3-year stock return vs a 7-year FD return on equal footing — CAGR normalises both to annual %.
Smoothes Volatility: A stock that went +50%, -20%, +30% over 3 years has an average of 20% — but CAGR shows the true 14.4% annual growth.
Global Standard: Mutual fund NAV returns, stock screener returns, and AMC performance reports all use CAGR as the baseline metric.
Reverse Calculation: You can also use CAGR in reverse — enter a starting amount, ending target, and years to find what CAGR you need to achieve your goal.

Example: CAGR vs Misleading Average Return

An investor allocates ₹50L in a volatile asset:
• Year 1: +50%
• Year 2: -20%

❌ Average Return = 15% (Misleading)
✅ Actual CAGR = (Ending / Initial)^(1/2) - 1 = ₹44,986

CAGR reveals that despite a 15% average, the actual annual gain was significantly lower (₹44,986) — because losses hit harder than gains recover.

Initial Investment: ₹50L

Final Value: Maturity Result

Duration: {YEARS} Years

Average Return: 15%

CAGR (Correct): ₹44,986

CAGR vs Absolute Return vs XIRR: Which to Use?

Choosing the right return metric matters — each has a specific use case:

Metric	Best Used For	Handles Multiple Investments?	Accounts for Time?
Absolute Return	Short-term, single investment return %	❌ No	❌ No
CAGR	Lumpsum single-investment over time	❌ No	✅ Yes
XIRR	SIPs, multiple cash flows, irregular investments	✅ Yes	✅ Yes (exact dates)
IRR	Business projects, real estate cash flows	✅ Yes	✅ Yes (periodic)

Frequently Asked Questions

⚠️ Disclaimer

The figures provided by this calculator are estimates based on the inputs you provide and standard financial formulas. STOCKCALC.IN does not offer investment advice. Please consult a qualified financial advisor before making any investment decisions.

CAGR Calculator (2026): Compound Annual Growth Rate Check

The Benchmark Rule.

Apple-to-Apple

The Volatility Shield

CAGR Computation

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How CAGR Is Calculated

Example: CAGR vs Misleading Average Return

CAGR vs Absolute Return vs XIRR: Which to Use?

Frequently Asked Questions

⚠️ Disclaimer