Compounded Annual Growth Rate (CAGR) measures the mean annual growth rate of an investment over a specified time period, assuming the investment grows at a steady rate. Unlike simple annual return (which ignores compounding) or point-to-point return (which is distorted by the start and end dates chosen), CAGR gives a single, comparable number for any investment period.

The CAGR formula is: CAGR = (End Value ÷ Start Value)^(1/n) − 1, where n is the number of years. A mutual fund that grew from ₹1 lakh to ₹2.5 lakh in 7 years has a CAGR of (2.5/1)^(1/7) − 1 = 14.0% per year. This is the standard metric used by AMFI, fund houses, and rating agencies for comparing fund performance.

Key pitfalls when interpreting CAGR: it ignores volatility (a fund with 14% CAGR might have dropped 40% in year 3), it is sensitive to the start and end dates (a fund at a market peak looks worse on CAGR than the same fund measured from a trough), and it does not reflect the experience of an SIP investor (for which XIRR is the correct metric). Always look at rolling CAGRs (1Y, 3Y, 5Y, 10Y rolling) rather than point-to-point trailing returns.

Use this calculator to compute CAGR from any start value, end value, and tenure. Input the initial investment, final value, and number of years to get the annualised return. Compare CAGRs across funds, asset classes, and time periods to benchmark performance. All calculations are for educational and analytical purposes only.