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Work out the compound annual growth rate (CAGR) of any investment between two dates.
Formula
CAGR = (Final / Initial)1/years − 1
Worked example
An investment that grew from Rs 1,00,000 to Rs 2,50,000 over 7 years: CAGR = (250000/100000)1/7 − 1 = 13.9% per year.
Quick reference
| Growth | 3 yr | 5 yr | 10 yr |
|---|---|---|---|
| 2× | 26.0% | 14.9% | 7.2% |
| 3× | 44.2% | 24.6% | 11.6% |
| 5× | 71.0% | 38.0% | 17.5% |
CAGR for a given total multiple.
Frequently asked questions
What is CAGR?
CAGR is the constant annual rate at which an investment would have grown to its final value from its starting value, if it grew steadily and reinvested returns each year. It smooths out year-to-year volatility.
Is CAGR the same as average return?
No. The simple average of yearly returns is usually higher than CAGR because it ignores the drag of volatility. A +50% year followed by a −50% year averages 0% but the CAGR is −13.4%.