Calculate Compound Annual Growth Rate
CAGR (Compound Annual Growth Rate) shows the constant annual rate at which an investment would have grown. It smooths volatility, making comparison easy. Unlike simple average, CAGR accounts for compounding effect of returns.
Absolute return shows total gain/loss without time context. CAGR normalizes returns to annual rate. 100% absolute return over 10 years equals 7.2% CAGR—very different from 100% in 2 years (41.4% CAGR). Always use CAGR for comparisons.
Equity: 12-15% is good, 15-20% is excellent. Debt: 7-9% is good. FD: 5-7%. Inflation: 5-6%. Aim for returns beating inflation by 4-6%. Higher CAGR usually means higher risk—evaluate risk-adjusted returns, not just CAGR.
CAGR assumes steady growth, hiding volatility—a fund might have years of -20% and +40%. It doesn't show intermediate cash flows or timing of returns. Use alongside other metrics like standard deviation, Sharpe ratio for complete picture.
CAGR = [(Ending Value / Beginning Value)^(1/n) - 1] × 100. If ₹50,000 grew to ₹1,50,000 in 8 years: CAGR = [(150000/50000)^(1/8) - 1] × 100 = [(3)^0.125 - 1] × 100 = 14.7%. Our calculator does this automatically.
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