What is the difference between CAGR and total return?

Total return is the overall percentage change; CAGR is the equivalent steady annual rate. Doubling your money over five years is a 100% total return but a 14.87% CAGR. Dividing 100% by 5 to get 20% is wrong, because it ignores that each year’s growth compounds on the previous one.

When should I use XIRR instead?

Whenever money moved in or out during the period. A SIP, additional purchases, or partial redemptions all make CAGR inapplicable, because there is no single starting amount held throughout. XIRR handles dated cash flows and is the correct measure in those cases.

Is a higher CAGR always better?

Not on its own. CAGR says nothing about how much risk was taken or how volatile the ride was. An investment with a 15% CAGR that halved twice along the way is not obviously better than a steadier 12%, particularly if you might have needed the money during a fall.

Can CAGR be negative?

Yes. If the ending value is lower than the beginning value, the rate is negative — the steady annual rate at which the investment shrank. Enter a smaller ending value above to see it.

CAGR Calculator

CAGR is the steady annual rate that would have taken an investment from its starting value to its ending value. It smooths out the bumps, which makes it useful for comparison and misleading if you forget the bumps were there.

Check the working

A worked example

A fixed case, for reference.

An investment grew from ₹1,00,000 to ₹2,00,000 over 5 years.

Form the growth ratio
$\frac{2{,}00{,}000}{1{,}00{,}000} = 2$
Take the fifth root
$2^{\frac{1}{5}} = 1.1486984$
Subtract one and convert to a percentage
$0.1486984 = 14.87\%$

The CAGR is 14.87%. The total return was 100%, but that is not "20% a year" — dividing total return by years is a common mistake that overstates the annual rate, because it ignores compounding.

The formula

CAGR = \left(\frac{V_{end}}{V_{begin}}\right)^{\frac{1}{n}} - 1

The nth root of the growth ratio, which undoes the compounding to leave the annual rate.

What each symbol means

V_begin: the value at the start
V_end: the value at the end
n: the number of years between them

What this assumes, and where it stops

Assumptions

A single amount was invested at the start and nothing was added or withdrawn until the end.
The beginning value is greater than zero. The formula divides by it, and a negative base raised to a fractional power is not a real number.
The period is measured in years; a partial year is entered as a decimal.

Limitations

CAGR hides volatility completely. Two investments with the same CAGR can have had wildly different journeys, and one may have been far riskier to hold.
It is the wrong tool when money went in or out during the period. Use XIRR for that — applying CAGR to irregular cash flows produces a number that means nothing.
A total loss has no finite compound rate, so this page reports -100%, which is the standard convention rather than a calculated figure.
Short periods annualise misleadingly: a 10% gain in one month annualises to over 200%, which nobody should expect to repeat.

What this calculator does

Calculates the compound annual growth rate between two values over a known period.
Also reports the total return, which is the uncompounded change over the whole period.
Accepts fractional years, so a six-month holding can be annualised.

Common questions

Different questions about the same money. These use the same conventions, so the numbers are comparable.

XIRR Calculator
Calculate the annualised return on irregular cashflows — the right measure when money went in and out on different dates.
Lumpsum Calculator
See how a one-time investment could grow at an assumed annual rate, and compare it against investing the same amount monthly.
Compound Interest Calculator
See how compounding frequency and time change an outcome, and why the last few years contribute the most.