07 CAGR Calculator
A noisy return, resolved to one rate.
Real returns are jagged year to year. CAGR is the single smooth annual rate that would have taken you from start to finish.
| Year | Value |
|---|---|
| — | |
How to read this tool What each input changes
CAGR is the single smooth annual rate that would have carried an investment from its start value to its end value, with the noise of the real path stripped out.
- Initial value
- What the investment was worth at the start of the period.
- Final value
- What it is worth at the end. The ratio between final and initial is the entire return that CAGR has to explain.
- Holding period
- How many years passed. The same total gain spread over more years is a lower annual rate, because each year has less to do.
What is CAGR versus absolute return?
Absolute return is total growth over the period (e.g. 100% gain). CAGR is the smooth annual rate that, compounded, would have produced that growth. 100% over 5 years equals roughly 14.87% CAGR. CAGR makes very different time periods comparable; absolute return on its own doesn't.
Is higher CAGR always better?
Higher CAGR usually means higher volatility and deeper drawdowns along the way. A 14% CAGR fund that suffered a 50% drawdown is not strictly "better" than a 12% CAGR fund that never fell more than 15%. CAGR is one dimension of fund quality, not all of it.
What CAGR is realistic for Indian equity funds?
10–14% per year over long horizons (10+ years) is realistic for well-chosen diversified equity funds. Short-term CAGRs (1–3 years) can swing dramatically and shouldn't be projected forward without skepticism.
Does CAGR account for risk?
No. CAGR is purely a return measure. Two funds with identical CAGRs can have very different paths — one steady, one violently volatile. Risk-adjusted measures like Sharpe ratio or standard deviation tell that side of the story; CAGR alone doesn't.
For illustrative purposes only. Mutual fund investments are subject to market risks. Past returns do not guarantee future performance. This tool does not constitute investment advice.