CAGR
What did your investment
really grow by each year?
Enter what you started with, what it is worth now and how long you held it. The compound annual growth rate is the steady yearly rate that links the two.
Compound annual growth rate
12.14% a year
- Total growth
- ×2.5
- Gain
- $15,000
- Over
- 8 years
In plain terms
What CAGR tells you about an investment, and what it hides
One rate for the whole holding period — ideal for comparing, silent about the route.
The Association of Mutual Funds in India describes CAGR as "the average annual return earned by an investment based on the initial invested amount, the final value of investment and the time-period lapsed". It is the one yearly rate that, compounded, turns the starting value into the ending value. AMFI's own example is ₹1,000 growing to ₹1,800 in five years: a CAGR of 12.5%. Dividing the 80% total gain by five years would give 16%, which overstates it, because it ignores that each year's growth builds on the last.
The rate is smoothed, and that is both its use and its limit. CAGR says nothing about the path. An investment that halves in its first year and doubles in its second is back where it started: its CAGR is 0%, although the average of its two yearly returns, −50% and +100%, is +25%. Two holdings with the same CAGR can have taken very different routes, one steady and one violent, and the number alone will not tell you which one you owned.
It is the standard way to state a return for the same reason: it puts holdings of different lengths on one yearly footing, and SEBI's Master Circular for Mutual Funds requires scheme returns to be shown as CAGR. It needs a single amount at the start and nothing added or taken out along the way. When money goes in at several dates, as with a SIP, a CAGR worked from the total invested and the final value understates the return, because much of that money was not invested for the whole period.
- Formula
- CAGR = (End ÷ Start)^(1 ÷ years) − 1.
- Part-years
- Allowed: three years and six months is 3.5.
- AMFI's example
- ₹1,000 to ₹1,800 in 5 years is a CAGR of 12.5%.
How it's calculated
The working behind the number
This CAGR calculator finds the single yearly growth rate that, compounded once a year, turns your starting value into your ending value over the period you enter. Years can be fractional, so three years and six months is 3.5. The result is negative when the investment lost value. It is a smoothed rate for the whole holding period, not the return earned in any one year.
Formula
CAGR = (End ÷ Start)^(1 ÷ t) − 1
- End
- The value at the end of the period.
- Start
- The value at the start. It must be more than zero.
- t
- The holding period in years, which may be fractional.
Assumptions and limits
- Nothing is added or withdrawn between the start and the end; only the two values and the time between them are used.
- Growth is treated as compounding once a year at one constant rate, which is what makes the figure smoothed.
- Income such as dividends counts only if it is included in the ending value you enter.
- The result is before tax, costs and inflation unless the values you enter are already net of them.
- The rate is kept at full precision and rounded only when shown.
A worked example
Take an investment that grew from $10,000 to $25,000 over 8 years.
- The total growth is ×2.5.
- CAGR = ($25,000 ÷ $10,000)^(1 ÷ 8) − 1.
That is 12.14% a year, compounded — the steady rate that turns the start into the end.
Computed by the calculator on this page, from the figures it opens with.
Sources
- AMFI (Mutual Funds Sahi Hai), What is CAGR or annualised return: definition, and the example of ₹1,000 growing to ₹1,800 in 5 years at 12.5% — checked 10 September 2026
- SEBI, Master Circular for Mutual Funds (20 March 2026): scheme returns to be shown as CAGR — checked 10 September 2026
By The CutYears team · Last reviewed 10 September 2026 · Full methodology
Questions people ask
Is CAGR the same as the average annual return?
No. A simple average adds up each year's return and divides by the number of years, which ignores compounding and overstates the result whenever returns vary. An investment that falls 50% and then rises 100% has an average return of 25% a year but a CAGR of 0% — it ended exactly where it began. CAGR is the rate that actually links the two values.
Can CAGR be negative?
Yes. If the ending value is below the starting value the rate is negative, and if the investment is worth nothing at the end it is −100%. A negative CAGR is the steady yearly rate of loss that would take the starting value to the ending value over the same period.
Why are mutual fund returns shown as CAGR?
Because it puts periods of different lengths on one yearly footing, so a three-year and a ten-year figure can be compared. SEBI's Master Circular for Mutual Funds (March 2026) requires scheme returns to be shown as CAGR. A past CAGR describes what happened; it does not predict next year's return.
Can I use CAGR to measure a SIP?
Not on the total invested. CAGR assumes the whole amount was invested on the first day, and in a SIP most instalments go in later, so annualising the final value against the total invested understates the return. Use the SIP calculator to project a monthly investment at an assumed rate instead.