CAGR Calculator

How to Use Strike Money's CAGR Calculator?

To use Strike Money's CAGR calculator, follow the 4 steps below.

Step 1: Enter the Initial Value — the amount you invested, or the starting value of the asset.

Step 2: Enter the Final Value and Investment Period — the current or final value of the investment, and the number of years (or exact dates) you held it.

Step 3: Add tax and inflation (optional) — pick an asset class and enter an inflation rate under "Tax and inflation" if you also want the real, post-tax CAGR.

Step 4: Read the results — the CAGR, absolute return, and real post-tax CAGR update instantly as you type.

For example, say you invested ₹1,00,000 and it grew to ₹1,80,000 over 5 years.

Growth Multiple = 1,80,000 ÷ 1,00,000 = 1.8

CAGR = (1.8 ^ (1 ÷ 5)) − 1 ≈ 12.47%

What Is CAGR (Compound Annual Growth Rate)?

CAGR, or Compound Annual Growth Rate, is the average annual rate at which an investment would have needed to grow, compounding every year, to go from its beginning value to its ending value over a stated period. It smooths out year-to-year volatility into a single, comparable number, which is why it's the standard way to describe the growth rate of stocks, mutual funds, ETFs, businesses, and other lump-sum investments.

A CAGR above 10% is generally considered good, but what counts as "good" depends heavily on the asset class — 5%-7% is considered good for fixed-income instruments like FDs and bonds, while 10%-15% is a reasonable expectation for long-term equity investments in India.

What Formula Does the CAGR Calculator Use?

The CAGR calculator uses the formula:

CAGR = ((Ending Value ÷ Beginning Value) ^ (1 ÷ Years)) − 1

The result is a decimal, which is multiplied by 100 to express it as a percentage. The calculation happens in four internal steps:

1. Find the growth multiple: divide the ending value by the beginning value.
2. Take the nth root: raise the growth multiple to the power of (1 ÷ number of years), where n is the number of years.
3. Subtract 1: this converts the growth multiple's root into a per-year growth rate, expressed as a decimal.
4. Convert to a percentage: multiply the decimal by 100.

Using the same example as above — ₹1,00,000 growing to ₹1,80,000 over 5 years — the growth multiple is 1.8, its 5th root is approximately 1.1247, subtracting 1 gives 0.1247, and multiplying by 100 gives a CAGR of 12.47%.

How Do You Calculate CAGR in Excel or Google Sheets?

You can calculate CAGR in Excel or Google Sheets with any of the following formulas, assuming the beginning value is in cell B1, the ending value is in cell B2, and the number of years is in cell B3.

• Direct formula: =((B2/B1)^(1/B3))-1
• Using the POWER function: =POWER(B2/B1,1/B3)-1
• Using the RRI function (Excel only): =RRI(B3,B1,B2) — RRI directly returns an equivalent interest rate for the growth of an investment and isn't available in Google Sheets.

All three formulas return CAGR as a decimal, so format the cell as a percentage, or multiply the result by 100, to read it as a percentage figure.

CAGR vs Other Return Metrics

CAGR is only one of several ways to measure investment performance, and each metric answers a different question.

CAGR vs Absolute Return

Absolute return measures the total profit or loss an investment generated, with no regard for how long it took to get there, while CAGR annualizes that same growth into a single average per-year rate. Say ₹1,00,000 grows to ₹1,50,000 over 3 years.

Absolute Return = ((1,50,000 − 1,00,000) ÷ 1,00,000) × 100 = 50%

CAGR = ((1,50,000 ÷ 1,00,000) ^ (1 ÷ 3)) − 1 ≈ 14.47%

The 50% absolute return tells you the total gain over the full 3 years, while the 14.47% CAGR tells you the investment grew at an average compounded rate of 14.47% every year — the figure you'd use to fairly compare this investment against one held for a different number of years.

Why Doesn't CAGR Work for SIPs? (CAGR vs XIRR)

CAGR assumes a single lump sum invested at one point in time and withdrawn at another, growing smoothly between the two dates. A SIP (Systematic Investment Plan), by contrast, involves a separate instalment invested every month, each with its own, different holding period — the first instalment might be invested for 5 years by the time you check your returns, while the most recent one has been invested for barely a month. Plugging a SIP's total invested amount and current value into the CAGR formula ignores this and produces a number that looks like a growth rate but doesn't actually correspond to any real annual return.

XIRR (Extended Internal Rate of Return) solves this by taking every individual cash flow — each SIP instalment, with its own date and amount — and solving for the single annualised rate that makes the present value of all those cash flows equal to the investment's current value. This is why XIRR, not CAGR, is the correct tool for SIPs or any investment with multiple, irregularly-timed cash flows; Strike Money's separate XIRR calculator is built for exactly this scenario.

When Should You Use CAGR (and When Not)?

Use CAGR when:

• You invested a single lump sum and want its smoothed annual growth rate.
• The holding period is more than 1 year, so annualizing is meaningful.
• You want to compare two or more lump-sum investments held for different durations.

Don't use CAGR when:

• You're evaluating a SIP or any investment with multiple cash flows at different dates — use XIRR instead.
• The holding period is under 1 year — CAGR extrapolates a short period's growth into a misleading annual figure; use absolute return instead.
• You need to understand volatility or the path the investment took — CAGR only looks at the start and end points.

What Is Real (Inflation-Adjusted) CAGR?

Real CAGR adjusts the nominal CAGR for inflation, showing the growth rate of your investment's actual purchasing power rather than just its rupee value. It's calculated as:

Real CAGR = ((1 + CAGR) ÷ (1 + Inflation Rate)) − 1

where CAGR and the inflation rate are both expressed as decimals inside the formula. Using the earlier example — a nominal CAGR of 12.47% with inflation running at 6% —

Real CAGR = ((1 + 0.1247) ÷ (1 + 0.06)) − 1 ≈ 6.10%

So while the investment's rupee value grew by 12.47% a year, its actual purchasing power only grew by about 6.10% a year once rising prices are accounted for. Real CAGR is always lower than nominal CAGR whenever inflation is positive, and it's the more honest figure to use when comparing an investment's growth against your real-world cost of living.

What Is a Good CAGR?

What counts as a "good" CAGR depends entirely on the asset class you're measuring, since different assets carry very different risk profiles.

In the Indian context, a CAGR of 10% or higher over a long holding period is generally considered a healthy outcome for equity-oriented investments, while fixed-income instruments are judged against a lower 6%-8% band. Always weigh a CAGR figure against the asset's risk level, the holding period, and inflation before calling it "good."

Can CAGR Be Negative?

Yes, CAGR can be negative. This happens whenever the ending value is lower than the beginning value — meaning the investment lost value over the period rather than growing. For example, ₹1,00,000 falling to ₹80,000 over 3 years gives a CAGR of ((80,000 ÷ 1,00,000) ^ (1 ÷ 3)) − 1 ≈ −7.17%, showing the investment shrank at an average compounded rate of about 7.17% a year.

Uses of CAGR

• Comparing stocks, funds and ETFs: CAGR puts investments with different starting points and durations on the same, comparable annual footing.
• Assessing company growth: analysts use CAGR to track how consistently a company's revenue, profit, or user base has grown year over year.
• Portfolio performance review: investors use CAGR to check whether their overall portfolio is compounding at a rate that matches their goals.
• Financial goal planning: CAGR assumptions are used to back-calculate how much to invest today to reach a future target corpus.
• Business benchmarking: businesses compare their own CAGR against industry peers to gauge relative growth performance.

Limitations of CAGR

• Ignores volatility and the path taken: CAGR only looks at the beginning and ending values, so it can't tell you whether the journey between them was smooth or came with sharp swings.
• Unfit for SIPs: because each instalment has its own holding period, CAGR gives an incorrect yield figure for SIPs or any staggered investment — use XIRR instead.
• Unfit for periods under 1 year: annualizing a short holding period's growth produces an exaggerated, misleading figure.
• Backward-looking only: CAGR describes what already happened; it is not a guarantee or prediction of future growth rates.

Common Mistakes When Calculating CAGR

• Using CAGR for SIPs: applying the lump-sum CAGR formula to a SIP's total invested amount and current value gives incorrect yield information — use XIRR for SIPs instead.
• Using the wrong tenure: entering the wrong number of years, or counting from the wrong start date, throws off the entire calculation since the exponent is so sensitive to it.
• Forgetting to convert to a percentage: the raw CAGR formula returns a decimal; forgetting to multiply by 100 (or format the cell as a percentage in Excel) makes the figure look far smaller than it is.
• Using CAGR for periods under a year: annualizing a sub-1-year holding period inflates or deflates the true return; absolute return is more appropriate there.
• Confusing CAGR with average return: CAGR is a compounded, geometric average, not the simple arithmetic average of yearly returns — the two can differ meaningfully, especially in volatile years.
• Ignoring inflation: quoting only the nominal CAGR without checking the real, inflation-adjusted figure can overstate how much purchasing power an investment actually created.