Is CAGR the same as average return?

No. Arithmetic average ignores compounding. CAGR is the geometric mean and reflects actual end-to-end growth. CAGR is always lower than the arithmetic mean for volatile assets.

What's a good CAGR for equity in India?

Long-term equity index (Nifty 50) averages 12–14% CAGR over 10+ year periods. Anything consistently above 18% should be inspected carefully for sustainability or hidden risk.

Why does CAGR understate winners?

CAGR hides volatility. A fund with 40% one year and -10% another may have the same CAGR as a steady 12% performer — but the experience is very different. Pair CAGR with standard deviation.

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Investing

CAGR Calculator

Compare investments fairly by computing their annualized growth rate.

Inputs

Initial value

₹100₹1,00,000₹10,00,00,000

Final value

₹100₹2,50,000₹1,00,00,00,000

Tenure

yrs

1 yrs550 yrs

Results

CAGR

20.11%

Annualized growth rate

Absolute return

150%

Total over the period

Multiple

2.5×

Money multiplier

How it compares

Bank FD (6.5% typical)+13.6%

PPF (7.1% typical)+13.0%

Nifty 50 long-term (13% typical)+7.1%

Top equity mutual fund (18% typical)+2.1%

What is CAGR?

CAGR (Compound Annual Growth Rate) smooths volatile returns into a single annualized number. It's the rate at which an investment would have grown if it returned the same amount each year.

Use CAGR to compare investments held for different periods. Absolute return doesn't tell you anything without time — 50% in 1 year and 50% in 5 years are wildly different.

CAGR formula

CAGR = (FV / PV)^(1/n) − 1

FV — Final value
PV — Initial value
n — Number of years
Result is the annualized growth rate.

Example: ₹1L → ₹2.5L in 5 years

Initial investment: ₹1,00,000
Final value: ₹2,50,000
Tenure: 5 years
Absolute return: 150%
CAGR: ~20.1% per year

An absolute return of 150% over 5 years works out to a CAGR of about 20% per year.

Frequently asked

Why CAGR matters

1Compares investments across different time periods fairly.
2Smooths out year-to-year volatility into one number.
3Industry standard for reporting mutual fund returns over 3+ years.
4Helps identify under-performers vs benchmark indices.
5Essential for retirement and goal-based planning math.

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