The Compound Annual Growth Rate (CAGR) is the single most useful metric for comparing investment performance across different asset classes and time periods. When a mutual fund says it delivered "18% returns," does that mean 18% last year, 18% on average, or 18% compounded? CAGR gives you the answer — a single, smooth annual growth rate that would take an investment from its starting value to its ending value, as if it grew at that exact rate every single year.
This guide explains the CAGR formula with a detailed worked example, shows you the historical CAGR of major Indian investments (Nifty 50, gold, PPF, FD, real estate), explains when to use CAGR vs XIRR vs absolute returns, and covers the important limitations of CAGR that every investor should understand before making decisions.
Calculate CAGR Instantly — Free
Enter beginning value, ending value, and years to get the CAGR. Or reverse-calculate to find how much your investment will be worth at a target CAGR.
CAGR Formula — Explained Step by Step
The CAGR formula is:
CAGR = (Ending Value ÷ Beginning Value)^(1 ÷ n) − 1
Where n = number of yearsThe formula asks: what single constant annual growth rate, applied every year for n years, would transform the beginning value into the ending value?
Worked example: Mutual Fund Investment
You invested ₹1,00,000 in a mutual fund in April 2020. In April 2025 (5 years later), your investment is worth ₹2,50,000.
CAGR = (2,50,000 ÷ 1,00,000)^(1 ÷ 5) − 1
= (2.5)^0.2 − 1
= 1.2011 − 1
= 0.2011
= 20.11% CAGRYour fund grew at an effective compounded annual rate of 20.11%. Note: this does not mean it grew 20.11% every year — it may have dropped 20% in 2020 and surged 50% in 2021. CAGR smooths out all volatility into a single equivalent annual rate.
Reverse calculation — how much will I have?
Future Value = Present Value × (1 + CAGR)^n
Example: ₹2,00,000 growing at 12% CAGR for 10 years:
FV = 2,00,000 × (1.12)^10 = 2,00,000 × 3.1058 = ₹6,21,170Quick CAGR calculation on a phone calculator
- Divide ending value by beginning value
- Press the yx button (or use 1/n as the exponent)
- Enter 1 ÷ n (e.g., 0.1 for 10 years)
- Press = and subtract 1
- Multiply by 100 for the percentage
CAGR of Major Indian Investments — Historical Comparison Table
Here is the long-term CAGR of the most common investment options available to Indian investors. This is the data every investor should have before deciding where to put their money:
| Asset Class | 5-Year CAGR | 10-Year CAGR | 15-Year CAGR | Risk Level |
|---|---|---|---|---|
| Nifty 50 (Index) | 14–16% | 12–14% | 13–15% | Medium-High |
| Nifty Midcap 150 | 18–22% | 16–18% | 15–18% | High |
| Gold (MCX) | 12–16% | 10–12% | 11–13% | Medium |
| Real Estate (metros) | 6–10% | 8–10% | 8–10% | Low-Medium |
| PPF (Public Provident Fund) | 7–7.1% | 7.5–8% | 7.5–8.5% | None (guaranteed) |
| Bank FD (SBI) | 5.5–7% | 6–7% | 6.5–7.5% | None (insured ₹5L) |
| Sovereign Gold Bonds (SGB) | 12–16% + 2.5% interest | ~14% | — | Low-Medium |
| NPS (Equity scheme) | 10–12% | 10–12% | — | Medium-High |
| EPF (Employee Provident Fund) | 8.1–8.25% | 8–8.5% | 8–8.65% | None (government) |
Note: Past returns do not guarantee future performance. Equity returns are approximate based on index performance. Gold returns in INR. Real estate returns are highly location-dependent. Consult a SEBI-registered adviser before investing.
Nifty 50 CAGR — the benchmark
The Nifty 50 index has delivered approximately 12–15% CAGR over 15+ years in INR terms (as of 2026). This is the commonly cited benchmark against which all equity mutual funds and other investments are evaluated. A fund that consistently beats the Nifty 50 CAGR by 2–3% over 10 years is considered an excellent performer. Most actively managed large-cap funds fail to beat the Nifty 50 over 10+ year periods — which is why index funds have grown rapidly in India.
CAGR vs XIRR vs Absolute Returns — When to Use Which
These three metrics all measure investment returns but answer different questions. Using the wrong metric leads to misleading conclusions.
| Metric | What It Measures | Best Used For | Limitation |
|---|---|---|---|
| Absolute Return | Total % gain regardless of time | Quick comparison of two investments of the same duration | Ignores time — useless for comparing different durations |
| CAGR | Annualised return for a single lump sum | Comparing lump-sum investments over different time periods | Ignores volatility; ignores cash flows (SIP) |
| XIRR | Annualised return with multiple irregular cash flows | SIP returns, real estate (with rent), dividends, partial redemptions | Requires actual cash flow dates; harder to calculate manually |
Why CAGR is wrong for SIP returns
If you invested ₹5,000/month via SIP for 5 years and the fund value is ₹4,20,000, the CAGR formula is incorrect here — because you didn't invest all ₹3,00,000 at the start. You invested it in 60 instalments. The correct metric is XIRR (Extended Internal Rate of Return), which accounts for the timing of each monthly investment. Always use XIRR for SIP performance evaluation.
Absolute return vs CAGR example
Investment A: ₹1L → ₹2L (100% absolute return) in 10 years. CAGR = 7.2%.
Investment B: ₹1L → ₹1.8L (80% absolute return) in 5 years. CAGR = 12.5%.
Investment B is actually better on an annualised basis, despite lower absolute returns. CAGR correctly captures this. Never compare investments using absolute returns alone across different time horizons.
Real CAGR vs Nominal CAGR — Adjusting for Inflation
A 12% CAGR in India is not the same as 12% CAGR in the US or Japan — because inflation is different. The real CAGR (inflation-adjusted) tells you how much your purchasing power actually grew:
Real CAGR = ((1 + Nominal CAGR) ÷ (1 + Inflation Rate)) − 1
Example: Nifty 50 nominal CAGR 13%, India CPI inflation 6%:
Real CAGR = (1.13 ÷ 1.06) − 1 = 1.066 − 1 = 6.6%Real CAGR comparison — Indian investments
| Asset | Nominal CAGR (15Y) | Real CAGR (at 6% inflation) | Verdict |
|---|---|---|---|
| Nifty 50 | 13–14% | 6.6–7.5% | Wealth-building |
| Gold (INR) | 11–13% | 4.7–6.6% | Inflation hedge |
| PPF | 7.5% | 1.4% | Safe but barely real growth |
| Bank FD | 6.5–7% | 0.5–1% | Often negative real returns |
| EPF | 8.25% | 2.1% | Modest real return |
| Real Estate | 8–10% | 1.9–3.8% | Illiquid; modest real return |
This table explains why financial planners consistently recommend equity as the primary long-term wealth-creation vehicle for Indian investors: it is the only common asset class with a consistently positive and substantial real CAGR over long periods.
Rule of 72 and CAGR Limitations Every Investor Must Know
The Rule of 72 is the fastest mental math trick using CAGR: divide 72 by the CAGR to find how many years it takes to double your money.
| CAGR | Years to Double (Rule of 72) | Actual Years |
|---|---|---|
| 6% (PPF) | 12 years | 11.9 years |
| 7.2% | 10 years | 10 years (exact) |
| 8% (EPF) | 9 years | 9.0 years |
| 12% (Nifty 50) | 6 years | 6.1 years |
| 15% (midcap) | 4.8 years | 5.0 years |
| 24% | 3 years | 3.2 years |
CAGR limitations you must understand
- Ignores volatility. Two investments can have the same CAGR — one going up 12% every year, the other swinging -40% and +70% alternately. CAGR does not capture the anxiety, risk of panic-selling, or sequence-of-returns risk in the volatile one.
- Sensitive to start/end dates. CAGR from March 2020 (market bottom) to March 2023 will be dramatically higher than from January 2020 to January 2023 for the same fund. Cherry-picking dates inflates CAGR.
- Ignores cash flows. As discussed, CAGR is incorrect for SIP or dividend-reinvestment calculations. Use XIRR.
- Does not predict the future. A 15-year CAGR of 14% for Nifty 50 does not mean the next 15 years will also deliver 14%. CAGR is a historical measure, not a forecast.
- Nominal, not real. Unless you specifically calculate real CAGR, the headline figure does not account for inflation eroding your purchasing power.
When evaluating an investment, always ask for: (1) CAGR over multiple time periods (3Y, 5Y, 10Y), (2) CAGR relative to the benchmark index, and (3) the maximum drawdown (worst peak-to-trough loss). These three together give a much more honest picture than CAGR alone.
How to Use the Tool (Step by Step)
- 1
Enter the beginning investment value
Open the CAGR Calculator and enter the amount you originally invested (e.g., ₹1,00,000).
- 2
Enter the ending investment value
Enter the current or final value of the investment (e.g., ₹2,50,000). This is the value after all growth, dividends reinvested.
- 3
Enter the number of years
Enter the exact investment duration. For partial years, use decimals (e.g., 3.5 for 3 years and 6 months).
- 4
Review the CAGR result
The calculator shows the CAGR percentage. Compare this against the benchmarks in this guide — Nifty 50 (12–14%), gold (11–13%), PPF (7.5%) — to assess your investment performance.
- 5
Use the reverse calculation
Switch to "Find Future Value" mode and enter a CAGR to project how your investment will grow. Use the Rule of 72 shortcut — divide 72 by the CAGR for a quick doubling-time estimate.
Frequently Asked Questions
What is the CAGR formula?+−
CAGR = (Ending Value ÷ Beginning Value)^(1/n) − 1, where n is the number of years. For example, an investment growing from ₹1,00,000 to ₹2,50,000 in 5 years has a CAGR of (2.5)^0.2 − 1 = 20.11%. This is the annualised growth rate that would produce the same result if applied consistently each year.
What is a good CAGR for a mutual fund in India?+−
A CAGR significantly above the Nifty 50 benchmark (historically 12–14% over 15 years) is considered good for equity funds. For large-cap funds, beating the Nifty 50 by 2–3% CAGR over 10 years is excellent. For mid-cap and small-cap funds, 16–18% CAGR over 10 years is a strong performance. Always compare fund CAGR against its category benchmark, not just the absolute number.
What is the difference between CAGR and XIRR?+−
CAGR is for lump-sum investments — it calculates the annualised return between a single start value and end value. XIRR is for investments with multiple cash flows at different dates (SIPs, dividends, partial withdrawals). For SIP mutual fund performance, always use XIRR, not CAGR. Most mutual fund platforms like Groww and Zerodha show XIRR for SIP investments.
What has been the CAGR of Nifty 50 historically?+−
The Nifty 50 has delivered approximately 12–15% CAGR in INR terms over rolling 15-year periods (as of 2026). Over 10-year rolling periods, the range is wider: roughly 8–18% depending on start date. The Nifty 50 had a particularly strong run from 2013–2023. After inflation (approximately 6% CPI), the real CAGR is approximately 6–8% over long periods.
How do I use the Rule of 72 with CAGR?+−
Divide 72 by the CAGR percentage to find the approximate number of years to double your money. Examples: 6% CAGR → doubles in ~12 years; 12% CAGR → doubles in ~6 years; 24% CAGR → doubles in ~3 years. For more precision, use 69.3 instead of 72 (based on natural log of 2). The Rule of 72 is accurate within ±1 year for CAGR values between 5% and 25%.
What is real CAGR vs nominal CAGR?+−
Nominal CAGR is the raw return figure before adjusting for inflation. Real CAGR = (1 + Nominal CAGR) ÷ (1 + Inflation) − 1. For example, Nifty 50 at 13% nominal CAGR with 6% CPI inflation gives approximately 6.6% real CAGR. Real CAGR tells you how much your actual purchasing power grew. Bank FDs at 6.5% nominal CAGR with 6% inflation have a real CAGR of just 0.47% — barely growing in real terms.
Calculate CAGR Instantly — Free
Enter beginning value, ending value, and years to get the CAGR. Or reverse-calculate to find how much your investment will be worth at a target CAGR.
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