CAGR Calculator

CAGR (Compound Annual Growth Rate) is the annualized average rate of return of an investment over a specified period longer than one year. Unlike simple average returns, CAGR smooths out volatility and shows you the steady rate at which your investment would have grown if it had compounded at the same rate every year. It is the most widely used metric to compare the performance of stocks, mutual funds, and other investments in India.

CAGR is calculated using the formula: CAGR = (Final Value / Initial Value)^(1/n) - 1, where n is the number of years. For example, if you invested ₹1,00,000 and it grew to ₹2,00,000 in 5 years, the CAGR would be (2,00,000/1,00,000)^(1/5) - 1 = 14.87%. This means your investment grew at an equivalent steady rate of 14.87% per year, even if actual year-to-year returns varied.

Historically, the Nifty 50 index has delivered a CAGR of approximately 11-13% over 15-20 year periods. A CAGR above 15% for an individual stock or mutual fund is considered good, while above 20% over 5+ years is excellent. High-growth smallcap and midcap stocks can deliver 25-40% CAGR over shorter periods, but they also carry higher risk. For comparison, bank FDs offer 6-7% and PPF offers around 7.1%.

Absolute return is the total percentage gain or loss on an investment without considering the time period. If you invested ₹1 lakh and got back ₹3 lakh, your absolute return is 200%. CAGR, on the other hand, annualizes this return. If those 200% returns came over 10 years, the CAGR would be 11.6%. CAGR is more useful for comparing investments held over different time periods, while absolute return only tells you the total gain.

No, CAGR is a backward-looking metric that measures historical performance. It does not predict or guarantee future returns. A stock that delivered 25% CAGR over the last 5 years may underperform in the next 5 years. CAGR also hides year-to-year volatility — an investment with 15% CAGR over 5 years could have had +50% in one year and -20% in another. Always use CAGR alongside other metrics like standard deviation, maximum drawdown, and fundamental analysis.

The Rule of 72 is a quick mental math shortcut to estimate how long it takes for an investment to double. Simply divide 72 by the CAGR percentage. At 12% CAGR (typical for Nifty 50), your money doubles in approximately 72/12 = 6 years. At 15% CAGR, it doubles in about 4.8 years. At 8% (typical FD rate), it takes 9 years to double. This rule helps Indian investors quickly compare the wealth-building potential of different asset classes.