CAGR Calculator

Five years ago, you invested ₹1 lakh in a mutual fund.
Today, it’s worth ₹1.61 lakh.

Your friend smiles, “That’s a 61% return!”
You nod, but you wonder — how much did it really grow every year?

That’s when CAGR walks in — quiet, consistent, and brutally honest. It doesn’t brag about short-term highs or hide the lows. It simply tells you the truth: how fast your investment has actually grown, on average, year after year.

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What is CAGR?

CAGR stands for Compound Annual Growth Rate.
It shows the rate at which your investment would have grown annually if it had grown steadily over a specific period — assuming all profits were reinvested.

In simpler terms, CAGR answers one clear question:

“If my investment had grown at a constant rate every year, what would that rate be?”

So, if you started with ₹1,00,000 and ended up with ₹1,61,000 after five years, CAGR tells you that your investment grew at an average rate of around 10% every year.

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The Formula (and How It Works)

CAGR = (EV / BV)^1/n − 1

Example:

• Beginning Value (BV): ₹1,00,000
• Ending Value (EV): ₹1,61,000
• Number of Years (n): 5

CAGR = (161000 / 100000)^1/5 − 1 = 1.61^0.2 − 1 = 0.10 = 10%

That means your investment grew at 10% per year, compounded annually.

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Why CAGR Matters

CAGR isn’t just a number — it’s perspective. It cuts through the noise of fluctuating returns and gives you a clear picture of performance.

Here’s why it’s valuable:

• Makes comparisons easy — whether you’re checking mutual funds, stocks, or even business revenue, CAGR standardizes growth into one comparable figure.
• Reveals real performance — total returns can be deceptive; CAGR shows the annualized truth.
• Helps you plan goals — once you know your CAGR, you can estimate how much your money might grow in 5, 10, or 20 years.
• Adds discipline — it reminds you that true growth is a marathon, not a sprint.

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Real-World Uses of CAGR

CAGR isn’t limited to investments. You’ll find it in every corner of financial life:

• Mutual funds: Compare 5-year or 10-year returns.
• Stock performance: Understand a company’s growth trajectory.
• Business growth: Track annual revenue increase over years.
• Portfolio tracking: Measure long-term wealth creation.
• Personal goals: Estimate how much CAGR you need to reach ₹1 crore in 15 years.

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CAGR vs. Other Metrics

Metric	Best For	What It Considers	Drawback
CAGR	Single lump-sum investments	Start value, end value, and time	Ignores volatility
XIRR	SIPs or multiple cashflows	Amounts + dates of each flow	Needs detailed inputs
Average Return	Quick comparison	Arithmetic mean	Ignores compounding

In short:
Use CAGR for one-time investments,
Use XIRR for regular investments,
and ignore average returns — they flatter but don’t tell the truth.

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Reverse CAGR — When You’re Planning Forward

CAGR isn’t just for looking back. You can also use it to plan ahead.

Let’s say you want to grow ₹10 lakh into ₹25 lakh in 8 years.
What CAGR do you need?

Required CAGR = (Target / Present)^1/n − 1

That means you’ll need your investment to grow at 12.2% per year to meet your goal.

This “reverse CAGR” mode is perfect for goal-setting and financial planning — and our Wealth Yogi CAGR Calculator can help you find it in seconds.

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The Power of Compounding (Visual Example)

Here’s what ₹1 lakh looks like growing at 10% CAGR over 5 years:

Year	Investment Value (₹)
1	1,10,000
2	1,21,000
3	1,33,100
4	1,46,410
5	1,61,051

That’s the quiet magic of compounding — earning returns on your returns.

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Common Mistakes When Using CAGR

1. Using wrong time period: Always use the actual number of years, not calendar years.
2. Ignoring volatility: CAGR smooths the ride, but the journey might be rough.
3. Applying it to SIPs: Use XIRR for SIPs; CAGR only fits one-time investments.
4. Forgetting inflation: A 10% CAGR with 6% inflation means only 4% real growth.
5. Comparing short durations: CAGR shines over long periods — not 3 months or 6 months.

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CAGR’s Strengths and Limitations

Strengths:

• Easy to understand
• Captures compounding effect
• Perfect for long-term comparison

Limitations:

• Assumes smooth growth
• Doesn’t show volatility or risk
• Not suitable for multiple cash flows

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Frequently Asked Questions

Q1. What is a good CAGR for mutual funds?
A good equity mutual fund CAGR is typically between 10% and 12% over the long term.

Q2. Can CAGR be negative?
Yes. If your investment’s value has decreased over time, the CAGR will be negative.

Q3. Does CAGR include dividends?
Only if dividends are reinvested or included in the final value.

Q4. Is CAGR the same as IRR?
No. CAGR assumes a single lump-sum investment, while IRR/XIRR handle multiple cashflows.

Q5. Can I use CAGR for business performance?
Absolutely. CAGR is commonly used to track annual sales, revenue, or profit growth.

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Conclusion

CAGR doesn’t boast. It reveals.
It doesn’t promise overnight success; it celebrates steady growth.
It’s the number that turns your investment story into a simple, honest sentence: This is how fast your money truly grew.