What is the CAGR formula?

CAGR = (Final value ÷ Initial value)^(1 ÷ years) − 1, expressed as a percentage. It is the constant annual rate at which an investment would have grown to reach the final value from the initial one.

Why use CAGR instead of total return?

Total return ignores time, so a 100% gain over 2 years and over 10 years look the same. CAGR annualises the return, making investments of different durations directly comparable.

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The compound annual growth rate of any investment — the apples-to-apples way to compare returns across different time periods.

Your investment

Initial value (₹)

₹

Final value (₹)

₹

Period (years)

Growth rate

CAGR

Absolute return0%

Absolute gain₹0

CAGR0%

CAGR is a smoothed average — it doesn't reflect year-to-year volatility along the way.

The CAGR formula

CAGR = (Final ÷ Initial)^(1 ÷ years) − 1. It answers "at what steady annual rate would my money have grown to get here?" Because it annualises, it lets you compare a stock held for 3 years against a fund held for 8 on equal footing — something raw total return can't do.

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