Calculate the average annual return (CAGR) of an investment based on its beginning and ending value.
This calculator computes the Compound Annual Growth Rate (CAGR) of an investment — the smoothed annual rate at which a lump sum investment grew from its beginning value to its ending value over a given number of years. CAGR is the most accurate measure of an investment\'s true annual performance because, unlike a simple arithmetic average of yearly returns, it accounts for the compounding effect. It is widely used in India to compare mutual fund returns, stock portfolio performance, EPF/PPF growth, and real estate appreciation.
CAGR answers the question: "At what single constant annual rate would the investment have grown from the beginning value to the ending value, compounding each year?" It eliminates the distortion of volatile year-by-year returns and gives a single comparable growth rate.
Formula: CAGR = (Ending Value ÷ Beginning Value)1 ÷ Years − 1. Total Return = (Ending Value − Beginning Value) ÷ Beginning Value × 100%.
Example: An investment of ₹1,00,000 grew to ₹1,80,000 over 5 years: CAGR = (1,80,000 ÷ 1,00,000)1/5 − 1 ≈ 12.47% per annum (example rate — this reflects the specific investment scenario entered). Total return = 80%. Gain = ₹80,000. (Note: CAGR does not account for dividends, SIP contributions, or taxes unless these are reflected in the ending value.)
CAGR is the standard performance metric used by AMFI (Association of Mutual Funds in India) and fund houses when advertising mutual fund returns, making it essential for Indian investors to understand. When fund factsheets show "5-year return: 14.2% CAGR" or "since inception CAGR: 17.8%", they are referring to this compounded annualised return. SEBI mandates that mutual fund performance is disclosed as CAGR for periods of 1 year and above, using trailing returns (from the current date backwards). For SIP (Systematic Investment Plan) investments where regular contributions are made, CAGR is not the appropriate metric — instead, XIRR (Extended Internal Rate of Return) accounts for the timing of multiple cash flows. The distinction matters significantly: a SIP in a fund with 15% CAGR does not guarantee a 15% XIRR on your SIP, because the money invested in the last few months has had very little time to compound. For Indian equity markets, the Nifty 50 index has historically delivered a CAGR of approximately 12-14% over long periods (10+ years), while small-cap indices have delivered higher but more volatile CAGRs. Fixed income instruments like PPF (currently 7.1% per annum) and EPF (8.25% per annum for 2023-24) provide lower but more predictable compound annual growth. Real estate CAGRs in India vary significantly by location — prime metro locations have seen appreciation of 6-12% CAGR in some periods, while peripheral and tier-2 cities have varied widely.
Absolute return (also called total return) measures the percentage gain or loss on an investment without accounting for the time period. For example, if ₹1,00,000 became ₹1,80,000, the absolute return is 80% regardless of whether this took 1 year or 10 years. CAGR annualises this return — if it took 5 years, CAGR ≈ 12.47% per annum; if it took 1 year, CAGR = 80%. Absolute returns can be misleading for comparing investments held over different periods — CAGR is always the better comparison metric for investments held for varying durations.
The Nifty 50 index has historically delivered a CAGR (price return, excluding dividends) of approximately 12-14% over long periods of 15-20 years. Including dividends (total return), the CAGR has been slightly higher. However, these are historical averages — actual returns over any specific period depend heavily on the entry and exit timing. The best 10-year rolling CAGR for Nifty 50 has exceeded 20%, while the worst 10-year period delivered near-zero returns. This variability is why CAGR over short periods (1-3 years) for equity investments should be interpreted with caution.
No — CAGR is only appropriate for lump-sum investments where the entire amount is invested at one point in time. For SIP (Systematic Investment Plan) investments where money is invested regularly over time, XIRR (Extended Internal Rate of Return) is the correct metric, as it accounts for the different amounts of time each instalment has had to compound. SEBI regulations require fund houses to report SIP returns as XIRR, not CAGR. Our XIRR Calculator can compute the actual annualised return on a series of SIP investments when you know the dates and amounts of each instalment and the current portfolio value.
A "good" CAGR depends on the asset class and risk level. General benchmarks in India: Savings account: 3-4%. Fixed deposits: 5.5-7.5%. PPF: 7.1% (current rate). EPF: 8.25% (2023-24). Debt mutual funds: 6-9% (depending on duration and credit quality). Large-cap equity mutual funds: 10-14% over long periods (subject to market risk). Mid and small-cap equity funds: 12-18%+ over long periods (higher risk). Direct equity (stock picking): highly variable. Real estate: 6-12%+ in prime locations. For equity investments, a CAGR above the Nifty 50 benchmark over the same period is generally considered above-average.
SEBI mandates that mutual fund houses in India report trailing returns as CAGR for periods of 1 year or more in all advertisements, fact sheets, and communications. The 1-year, 3-year, 5-year, and since-inception CAGR are the standard disclosure periods. These are trailing returns — measured from the current date backward. A fund's 5-year CAGR therefore changes every day as the trailing window shifts forward. It is important to check the benchmark's CAGR for the same period alongside the fund's CAGR to assess whether the fund has outperformed or underperformed its benchmark on a risk-adjusted basis.
Yes — if the ending value is less than the beginning value, CAGR is negative. For example, if ₹1,00,000 invested in stocks fell to ₹70,000 over 3 years, CAGR = (70,000 ÷ 1,00,000)<sup>1/3</sup> − 1 ≈ −11.0% per annum. This means the investment lost approximately 11% per year on a compounded basis. Negative CAGRs are common for equity investments over short periods during market downturns, and illustrate why equity investing requires a long time horizon to smooth out volatility.
Disclaimer: The information and calculations on this page are for educational and illustrative purposes only. CAGR is a mathematical measure of past growth and does not predict future returns. Past performance is not a reliable indicator of future performance. Investment returns are subject to market risk. This calculator does not account for taxes, dividends, SIP contributions, or intermediate cash flows. Consult a SEBI-registered investment adviser before making investment decisions.