investingreturnscagr
What is CAGR? The only growth number that matters
Compound Annual Growth Rate explained — why it beats absolute returns for comparing investments, with a simple worked example.
14 May 20265 min read
What CAGR actually measures CAGR is the single annual growth rate that would take an investment from its starting value to its ending value, as if it grew smoothly every year.
Why not just use total return? A 150% total return sounds great — until you learn it took 15 years. CAGR annualises the gain so you can compare investments of different lengths on equal footing.
A quick example ₹1,00,000 growing to ₹2,50,000 over 5 years is a 150% total return, but only about a 20% CAGR. That single number lets you compare it directly against a fixed deposit or another fund.
The catch CAGR is a smoothed average — it hides the bumpy ride. Two investments with the same CAGR can have very different year-to-year volatility.
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