Determine the true annual growth of your investments
Your investment grew from ₹10,000 to ₹20,000 in 5 years at a CAGR of 0%
Understanding the importance of Compound Annual Growth Rate
CAGR smooths out volatility and gives a single annual growth rate to measure investment performance over time.
Allows you to compare returns of different assets (stocks, mutual funds, gold) on a level playing field.
Helps determine the required rate of return to reach a financial goal from your current investment.
Unlike absolute returns, CAGR accounts for the power of compounding over the investment duration.
Provides a more realistic picture of growth compared to simple average returns.
Useful for evaluating performance over varying time periods like 3, 5, or 10 years.
Compound Annual Growth Rate (CAGR) is the annual rate of return required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each year.
Filters out volatility
Global metric
True growth picture
CAGR = (Ending Value / Beginning Value)1/n - 1
where n = number of years
Divide the Final Value by the Initial Value.
Raise the result to the power of 1 divided by number of years (1/n).
Subtract 1 from the result.
Multiply by 100 to get the percentage figure.
Common queries about CAGR
Absolute return only tells you how much an asset grew in total, without considering time. CAGR tells you the annual growth rate, accounting for the time period and compounding.