Question 1

What is CAGR (Compound Annual Growth Rate)?

Accepted Answer

CAGR is the rate at which an investment would have grown if it had grown at a steady rate each year and compounded annually. It smooths out year-to-year volatility into a single annualised return, making it the standard way to compare investments over multi-year periods.

Question 2

How is CAGR calculated?

Accepted Answer

CAGR = (Ending Value ÷ Beginning Value)^(1 ÷ Years) − 1. For example, an investment that grows from ₹1,00,000 to ₹2,00,000 over 5 years has a CAGR of (2)^(1/5) − 1 ≈ 14.87% per annum.

Question 3

What is the difference between CAGR and absolute return?

Accepted Answer

Absolute return is the total percentage gain over the whole period — (Ending − Beginning) ÷ Beginning × 100 — and ignores time. CAGR annualises that return using compounding, so it tells you the equivalent steady yearly growth rate. For periods longer than a year, CAGR is the more meaningful comparison; SEBI requires mutual fund returns over one year to be shown as CAGR.

Question 4

Can CAGR be negative?

Accepted Answer

Yes. If the ending value is lower than the beginning value, the CAGR is negative, indicating an annualised loss. For example, ₹1,00,000 falling to ₹50,000 over 2 years gives a CAGR of about −29.29% per annum. The calculation is valid as long as the beginning value is positive and the ending value is not negative.

Question 5

What are the limitations of CAGR?

Accepted Answer

CAGR assumes smooth, steady growth and only uses the beginning and ending values — it ignores volatility and any interim highs, lows, or additional cash flows. For investments with periodic contributions (like a SIP), XIRR is a more accurate measure. CAGR is best for a single lump-sum investment measured between two points in time.

Question 6

Is my data sent to any server?

Accepted Answer

No. All calculations happen entirely in your browser using JavaScript. No data is sent to any server.

CAGR Calculator

Frequently Asked Questions

CAGR Calculator

Frequently Asked Questions