Calculate Your Annualized Returns Easily
What is CAGR?
CAGR (Compound Annual Growth Rate) is the most accurate way to assess how much your investment has grown every year on a compounded basis. Absolute return only shows the total gain. Most investments go up and down. One year you might gain 20%, and the next you might lose 5%. CAGR ignores those daily ups and downs and shows you the one steady yearly rate your money would have grown at to reach its final value. It tells you by how much your investment grew at a steady rate every year.
CAGR Calculator
How to use this calculator:
To use this calculator you need to enter the Initial Investment, which is the amount you originally put in. Next, enter the Final Value, which is what that investment is worth today. Finally, enter the Duration in years to show how long you held the investment. Click calculate, the tool will instantly show you the average yearly growth rate, helping you understand how your money performed.
CAGR vs. Absolute Returns: What is the Difference?
It is easy to get confused between the two. Here is a simple way to differentiate them:
- Absolute Return: If you invested ₹1 Lakh and it became ₹1.5 Lakh in 5 years, your absolute return is 50%.
- CAGR: In the same example, your CAGR is 8.45%.
Why should we use CAGR?
Because it helps you compare your investment against other available options like Fixed Deposits (FDs) or the Nifty 50 index, which are always quoted in annual terms.
How to Calculate CAGR Manually?
If you want to understand and apply the formula behind the tool, here it is:
CAGR = [(Ending Value / Beginning Value) ^ (1 / Number of Years)] – 1
Final Value- Current value of the investment.
Initial Value- The amount you originally invested.n: Number of years you stayed invested.
When should you use this calculator?
This tool is perfect for evaluating:
- Lumpsum Mutual Fund Investments: See how your one-time investment has performed over 3, 5, or 10 years.
- Gold: Calculate the annual growth of physical gold or SGBs.
- Real Estate: Find out if that property you bought 10 years ago actually beat inflation.
- Stock Portfolios: Check the annual growth of a specific stock from the date of purchase.
Important Note: If you are investing via SIPs, CAGR is not the right tool. You should use our XIRR Calculator instead, as it accounts for multiple investment dates.
Things to remember:
- Don’t be fooled by big numbers: A 100% return sounds great, but if it took 15 years to achieve that return, the CAGR is only about 4.7%, which might not even beat inflation
- Consistency matters: A higher CAGR over a longer period is the ultimate objective of wealth creation.
- Use it for comparison: Always compare your portfolio’s CAGR against a benchmark (like the Nifty 50) to see if you are actually outperforming the market.