What is CAGR in investing?

CAGR means Compound Annual Growth Rate, the annualized growth rate of an investment over multiple years.

How to calculate CAGR?

CAGR = (Ending Value / Beginning Value)^(1/n) - 1, where n is the number of years.

When should I use CAGR instead of absolute return?

Use CAGR when comparing investments with different holding periods because it normalizes return to an annual rate.

Should I compare FD and equity using CAGR?

Yes, CAGR helps compare annualized performance of FDs and equity investments over the same period, though risk differs.

What are the limits of CAGR?

CAGR smooths volatility and does not show interim ups and downs, so it should be used with risk and drawdown context.

What is CAGR?

CAGR is the annualized growth rate that tells you how fast an investment grew per year over a period.

CAGR formula

CAGR = (Ending Value / Beginning Value)^1/n − 1

Here, n is the number of years you stayed invested.

Example: FD vs equity

If ₹1,00,000 becomes ₹1,33,823 in 5 years in an FD, CAGR is about 6%. If the same amount becomes ₹1,76,234 in equity, CAGR is about 12%. CAGR helps compare growth pace fairly.

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What is CAGR?

CAGR formula

Example: FD vs equity

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