CAGR & returns
Annualised return between two values
Worked example
Using the default values, cagr & returns gives a compound annual growth rate of 20.11%.
| Item | Value |
|---|---|
| Held for | 5 years |
| Absolute return | +150.0% |
| CAGR | 20.11% a year |
| Gain | ₹1,50,000 |
| Growth multiple | 2.5× |
| At this rate, doubles every | 3.8 years |
| Same money in a 7% FD | ₹1,40,255 |
| Beat the FD by | ₹1,09,745 |
What you need
- Value at the start
- Value now
- Held for
Questions
What is the difference between absolute return and CAGR?
Absolute return is the total gain regardless of time. CAGR converts that into a yearly rate, so doubling in three years and doubling in ten look very different once annualised.
When should I not use CAGR?
When money went in or came out at different dates, such as a SIP. CAGR assumes one entry and one exit; use the internal rate of return for a series of cashflows.
Important
CAGR smooths a lumpy journey into one annual figure, which is right for comparing investments but hides the volatility along the way. It also assumes a single investment and a single exit — where money went in and out at different times, the internal rate of return is the correct measure instead.