Compound Annual Growth Rate (CAGR)

Investing a lump sum amount or making fixed contributions without withdrawals? While tracking your investment’s performance over time might seem straightforward, figuring out its average yearly growth rate can get confusing. That’s where the CAGR Calculator comes in a tool designed to simplify how you measure steady, compounded growth.

What is CAGR?

The Compound Annual Growth Rate (CAGR) is the average yearly rate at which your investment grows over a specific period, assuming it compounds smoothly. Think of it as a "flattened" growth rate that turns uneven returns into a steady annual figure. It’s perfect for single investments (like a fixed deposit or a one-time mutual fund purchase) or investments where you don’t add/withdraw funds over time.

How to Use CAGR Calculator

Calculating CAGR manually can be time-consuming, but our calculator makes it effortless. Just follow these steps:
1. Initial Investment: Enter the lump sum amount you started with (e.g., ₹50,000).
2. Final Value: Input the current or expected maturity value of your investment (e.g., ₹80,000).
3. Time Period: Specify the duration in years (e.g., 5 years).
4. Calculate: Hit the button to instantly see your CAGR.

In seconds, you’ll know the average annual growth rate of your investment!

How to Calculate CAGR in Excel

Prefer spreadsheets? Here’s a quick method:

• 1. Formula: Use =((End Value/Start Value)^(1/Years)) - 1.
• Example: If you invested ₹50,000 (cell A1) that grew to ₹80,000 (cell B1) over 5 years (cell C1), type =((B1/A1)^(1/C1)) - 1.
• 2. Result: Excel will show the CAGR as a decimal (e.g., 0.0985 = 9.85% annual growth).

When Should You Use CAGR?

CAGR shines in scenarios like:
- Lump sum investments: A one-time stock purchase or fixed deposit.
- Comparing performance: Evaluating which mutual fund or asset grew faster over 3, 5, or 10 years.
- Steady growth assessment: Ignoring short-term market swings to see the "big picture" growth.

Note: CAGR isn’t ideal if you’ve made multiple investments or withdrawals over time (use XIRR for those cases).

CAGR vs. XIRR: What’s the Difference?

• CAGR calculates the average yearly growth for a single investment with no additions/withdrawals.
• XIRR handles multiple transactions (like SIPs or withdrawals) and factors in the timing of each cash flow.

For example, if you invest ₹10,000 once and it becomes ₹20,000 in 5 years, CAGR tells you it grew ~14.87% yearly. But if you added ₹1,000 monthly, XIRR would give a more accurate return.

Why Use a CAGR Calculator?

1. Simplicity: No complex math just input three numbers.
2. Compare Investments: Easily judge if Stock A (12% CAGR) outperformed Mutual Fund B (8% CAGR).
3. Set Realistic Goals: Estimate how long it’ll take to double your money at a specific CAGR.
4. Ignore Market Noise: Focus on long-term trends, not yearly ups and downs.

In a Nutshell

Whether you’re reviewing a fixed deposit, a one-time mutual fund investment or comparing two assets, the CAGR Calculator is your go-to for understanding smooth, yearly growth. It’s quick, intuitive and perfect for straightforward investments. Try our calculator today it takes the guesswork out of measuring your financial progress!

For investments with multiple transactions, explore our XIRR Calculator to capture the full picture.