Investment Details
Common scenarios
CAGR
per annum, compounded
Initial Value
₹1,00,000
Final Value
₹2,00,000
Absolute Return
100.00%
Total Gain
₹1,00,000
Growth Breakdown
Initial Investment
₹1,00,000
50%
Total Gain
₹1,00,000
50%
Year-by-Year Growth
How your investment compounds over time
Year-by-Year Schedule
Investment value at end of each year
| Year | Value | Gain | Absolute Return |
|---|
What is CAGR?
CAGR stands for Compound Annual Growth Rate. It measures the average annual growth rate of an investment over a specified period, assuming the investment grows at a constant rate and profits are reinvested.
Unlike simple average returns, CAGR smooths out volatility and gives you a single, meaningful number to compare investments of different sizes and durations — making it the most widely used performance metric in finance.
Where is CAGR used?
Mutual fund performance reports, stock analysis, business revenue growth, real estate appreciation, and comparing fixed deposits vs equity investments.
How is CAGR Calculated?
The CAGR formula is straightforward:
Where Final Value is the investment value at end, Initial Value is the starting amount, and Years is the holding period.
To find Future Value given a CAGR:
FV = Initial × (1 + CAGR)^Years
CAGR Example Calculations
CAGR Benchmarks in India
* Historical averages. Past returns do not guarantee future performance.
Why CAGR is the Best Return Metric
- →Eliminates volatility noise — a stock might be up 50% one year and down 20% the next. CAGR smooths this to a single annualised rate you can act on.
- →Enables fair comparison — comparing a 3-year investment to a 10-year one using absolute returns is misleading. CAGR puts both on equal footing.
- →Used in AMFI fund reports — all Indian mutual fund fact sheets report returns as CAGR for periods longer than 1 year. Understanding CAGR helps you read these correctly.
- →Compounding intuition — CAGR helps you understand the power of compounding. A 12% CAGR doubles money in 6 years and grows it 10× in 20 years.
CAGR vs Other Return Measures
CAGR — Best for lumpsum investments
One entry, one exit. Perfectly represents the annualised growth of a single investment over any period. Used for stocks, FDs, real estate.
XIRR — Best for SIP / multiple cash flows
When you invest monthly (SIP), each instalment has a different holding period. XIRR accounts for this. For SIPs, always use XIRR, not CAGR.
Absolute Return — Misleading without time context
100% return sounds impressive. But if it took 20 years, that's only 3.5% CAGR — worse than a savings account. Always combine with the time period.
Frequently Asked Questions
Common questions about CAGR and investment returns