CAGR — compound annual growth rate — is the constant yearly rate that carries a starting value to an ending value over a stated number of years. If a corpus grew as if it earned the same percentage every year, and last year’s gain was left invested, that percentage is the CAGR.
It is a geometric mean, not an average of yearly returns. That is why a +50% year followed by a −50% year is not “0% CAGR”. ₹100 → ₹150 → ₹75 is a two-year CAGR of about −13.4%. The sequence matters; the formula only needs the first and last values plus time.
The formula, written out
Take ₹1,00,000 that becomes ₹1,76,234 in seven years. The ratio is 1.76234. Raise it to 1/7, subtract 1. You get roughly 8.4% a year. Check: 1,00,000 × (1.084)^7 ≈ 1,76,200. Small rounding is normal once you stop at two decimal places.
If you only have months, convert first. Twenty-seven months is 2.25 years. TheCagrRupee calculator does that conversion when you switch the period unit.
Why Indian factsheets lead with it
AMFI-format fund factsheets typically show 1-year, 3-year, 5-year, and 10-year returns, and since inception where the history exists. For periods longer than a year those trailing returns are CAGRs on a point-to-point NAV, not the return of a SIP. That is useful when you compare two diversified equity funds over the same window. It is misleading when you compare a three-year number with a ten-year number without noticing the window, or when you assume your SIP earned the same rate.
Bank fixed deposits quote a contracted rate, sometimes with quarterly compounding. That contracted rate is not computed the same way as a market CAGR, but you can still put principal and maturity proceeds into this calculator to see the effective annual rate you actually received after compounding frequency.
CAGR is silent on the path
Two funds can print the same 12% five-year CAGR. One wandered in a narrow band. The other halved in year two and clawed back. The formula cannot see the drawdown. If path risk matters — and for money you may need in three years, it does — look at rolling returns, maximum drawdown, or at least a NAV chart, not only CAGR.
Nominal, not real, and not after tax
The calculator’s output is a nominal rate on the two rupee amounts you typed. Consumer inflation in India has often sat in the 4–6% zone in quiet years and higher in others. A 10% CAGR against 5% inflation is closer to a 4.8% real rate: (1.10 / 1.05) − 1. Tax is a second haircut. Listed equity held more than a year is subject to long-term capital gains rules that change; FDs are taxed at slab. None of that is inside CAGR. Compute tax on the gain separately if you need a post-tax story.
What people confuse it with
- Absolute return — the whole gain as a percentage of start, with no time in the denominator. See CAGR vs absolute return.
- XIRR — the rate that sets the net present value of many dated cash flows to zero. SIPs live here. See CAGR vs XIRR.
- Simple interest — gain divided by start divided by years, without compounding. A 100% gain in 10 years is 10% simple and about 7.2% CAGR.
A quick check you can do by hand
The “rule of 72” says years to double ≈ 72 / rate. At 12% you are near six years. Invert it: if a corpus doubled in five years, 72 / 5 ≈ 14.4%, which is close to the true 14.87%. Use the rule as a smell test, then let the calculator do the exponent.
For a longer, dated mutual-fund walkthrough with an FD comparison, open theworked MF example.
Run the same numbers in the CAGR calculator, or read thedisclaimer before you treat a rate as a decision.