Quick answer
CAGR is the constant yearly rate at which an investment would grow from its starting value to its ending value. CAGR = (Final ÷ Initial)1/years − 1. If ₹1 lakh becomes ₹2.5 lakh in 5 years, the CAGR is 20.11%, even though the absolute return is 150%.
Key takeaways
- CAGR smooths out ups and downs. It does not show volatility.
- Use CAGR for one-time investments. For SIPs with many cash flows, use XIRR.
- Compare funds by CAGR over the same period, such as 5 years.
CAGR formula
CAGR = (FV ÷ PV)1/n − 1- FV = ending value
- PV = beginning value
- n = years
Frequently asked questions
What is a good CAGR?
It depends on the asset. For Indian large-cap equity, 11–13% over 10+ years is considered good. For FDs, CAGR equals the effective interest rate, usually 6–7.5%.
What is the difference between CAGR and XIRR?
CAGR assumes a single investment at the start. XIRR handles several cash flows on different dates, like SIPs and partial withdrawals. For a single lump sum, both give the same answer.
Can CAGR be negative?
Yes. If the final value is lower than the initial value, CAGR is negative. That shows the average yearly loss.
Sources & methodology
Formulas follow the standard methods used by Indian banks, fund houses and government schemes. Rates and tax rules were checked against official sources on 1 October 2026. Read our methodology.
This calculator gives an estimate for planning purposes. Actual returns, tax and eligibility depend on your situation and on product terms. It is not financial advice.