What is CAGR (Compound Annual Growth Rate)?

CAGR is the mean annual growth rate of an investment over a specified period of time longer than one year. It smooths out fluctuations and gives a steady annualized rate of return.

What is the formula to calculate CAGR?

CAGR = (End Value / Beginning Value)^(1 / Years) - 1. Multiply by 100 to express as a percentage.

What is the difference between Absolute Return and CAGR?

Absolute return measures the total percentage gain or loss without considering time duration. CAGR accounts for the time period and compounding, making multi-year investments comparable.

CAGR Calculator — Calculate Compound Annual Growth Rate Online

What is CAGR and How is it Calculated?

The Compound Annual Growth Rate (CAGR) is the standard metric used by financial analysts, investors, and business leaders to measure the smoothed annual return of an investment or metric over multiple years.

CAGR = [ ( End Value / Start Value ) ^ ( 1 / n ) − 1 ] × 100

End Value = Final investment value

Start Value = Initial principal invested

n = Number of investment years

Absolute Return vs CAGR Comparison

Metric	Absolute Return	CAGR (Annualized)
Formula	[(End - Start) / Start] × 100	[(End / Start)^(1/n) - 1] × 100
Time Factor	Ignores time taken completely	Normalizes returns per year
Best Used For	Short-term investments (< 1 year)	Long-term assets (> 1-10+ years)
Example (₹1L to ₹2L in 5 yrs)	100% Total Gain	14.87% per year CAGR

Frequently Asked Questions

Can CAGR be negative?

Yes. If the ending value is less than the beginning value, the CAGR will be a negative percentage, indicating an annualized loss over that duration.

Why is CAGR better than Average Annual Return?

Average annual return can be misleading due to volatility. For example, a 100% gain followed by a 50% loss yields a simple average of 25%, but you actually ended up with zero net gain (CAGR = 0%). CAGR reflects true compounded reality.

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