How to use the CAGR Calculator
- 1. Enter the starting valueType what you put in or what the figure began at.
- 2. Enter the ending valueType what it is worth now, and the years in between.
- 3. See your CAGRGet the yearly rate, total gain and growth multiple.
The CAGR formula
CAGR = (End ÷ Start)^(1 ÷ Years) − 1
CAGR is the steady yearly rate that takes the starting value to the ending value. It ignores the ups and downs in between.
Worked example: ₹1,00,000 becomes ₹2,50,000 in 5 years. End ÷ Start is 2.5. The fifth root of 2.5 is about 1.2011. Take away 1 and you get 20.11% a year.
You can check it backwards: ₹1,00,000 growing at 20.11% for 5 years reaches ₹2,50,000.
CAGR versus absolute return
In the example above, the absolute return is 150%. That sounds like 30% a year, but it is not. Dividing by 5 ignores compounding. The real yearly figure is 20.11%. This matters most when you compare two investments held for different lengths of time. Absolute return can make the older one look better, while CAGR puts both on the same yearly footing.
You can also use this for things other than money, like the growth of a business's revenue or users. Just drop the rupee sign from your thinking.
When CAGR can mislead
- It hides volatility. A smooth 20% path and a wild one can give the same CAGR.
- It ignores cash flows. If you added or took out money along the way, CAGR is the wrong tool. A SIP needs a different measure.
- Start and end dates matter. Change either one and the rate can shift a lot.
The starting value must be above zero, since nothing can compound from zero. A smaller end value is fine and gives a negative CAGR.
Want to project forward instead? Use the lumpsum calculator. To see whether your CAGR beat rising prices, compare it with the inflation calculator.
Frequently asked questions
Can CAGR be negative?
Yes. If the end value is lower than the start, the rate is negative. For example, ₹1,00,000 falling to ₹50,000 over 2 years is a CAGR of -29.29%.
Can I use it for SIP returns?
Not directly. CAGR suits a single investment. With many investments on different dates, it will give a wrong answer.
Why do I get an error with a zero start value?
Growth cannot be measured from zero. Enter a starting value above zero, and more than zero years.
Is the CAGR calculator free?
Yes. You enter your name and WhatsApp number once to see your result, and all other Uncodemy tools then open without the form.