How This Works
CAGR (Compound Annual Growth Rate) expresses the annual growth rate an investment would need to grow smoothly from its initial value to its final value over a given period, smoothing out the year-to-year fluctuations an investment might have actually experienced.
Enter the initial value, final value, and the number of years between them to get the CAGR, alongside the absolute (total, non-annualised) return and the plain gain or loss in value.
Frequently Asked Questions
What is CAGR used for?
CAGR is commonly used to compare the performance of different investments over the same period on a like-for-like annualised basis, since it smooths out volatility into a single average annual growth figure.
CAGR vs absolute return — what’s the difference?
Absolute return is the total percentage gain or loss over the entire period, regardless of how long it took. CAGR annualises that same return, making it comparable across investments held for different lengths of time.
What is considered a good CAGR?
It depends on the asset class and time period — long-term equity investments in India have historically delivered CAGRs in the low-to-mid teens over extended periods, while fixed-income instruments are typically lower. Compare against a relevant benchmark for the same period rather than a fixed target.
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