How do I calculate CAGR in Excel or Google Sheets?

=(End_Value/Start_Value)^(1/Years)-1. Enter as percentage format. For example: =(250000/100000)^(1/5)-1 = 0.201 = 20.1%.

Can CAGR be negative?

Yes. If your investment loses value overall, CAGR is negative. Example: ₹1 lakh shrinks to ₹70,000 in 3 years → CAGR = (0.7)^(1/3) − 1 = −10.8% per year.

IPOpulse shows '3Y Return' — is that CAGR?

Yes. When IPOpulse or any financial site shows a 3-year or 5-year return for a fund or stock, it is almost always stated as CAGR (annualised return), not cumulative return.

What is CAGR? Compounded Annual Growth Rate Explained

What is CAGR?

CAGR (Compounded Annual Growth Rate) is the rate at which an investment grows from its beginning value to its ending value, assuming profits are reinvested at the same rate each year. It is the "smoothed" annual return — it ignores volatility and shows what constant annual rate would produce the same result.

Formula: CAGR = (Ending Value / Beginning Value) ^ (1 / Years) − 1

Example: If ₹1 lakh grows to ₹2.5 lakh in 5 years → CAGR = (2.5) ^ (1/5) − 1 = 20.1% per year.

Why CAGR is Better Than Simple Returns

Simple return: ₹1 lakh → ₹2.5 lakh = 150% gain. This says nothing about how long it took. CAGR normalises for time, making different investments comparable:

Investment A: 100% return in 2 years → CAGR = 41%
Investment B: 100% return in 10 years → CAGR = 7.2%

Investment A is clearly superior — but simple percentage alone hides this.

CAGR of Nifty 50 (Historical)

10-year CAGR (2014–2024): approximately 12–13% per year
20-year CAGR (2004–2024): approximately 14–15% per year
30-year CAGR (1994–2024): approximately 12–13% per year

These returns assume reinvestment of dividends (total return). Pure price CAGR is slightly lower. Historical CAGR is not a guarantee of future returns but is a useful benchmark.

How to Use CAGR for Goal Planning

Using the reverse CAGR formula, you can estimate how long it takes to double money at a given return rate — approximately following the Rule of 72:

Years to double = 72 / CAGR%
At 12% CAGR: money doubles in 6 years
At 15% CAGR: money doubles in 4.8 years
At 7% (FD rates): money doubles in ~10 years

CAGR vs XIRR — When to Use Which

CAGR: Use when comparing point-to-point investment returns (one lump sum invested at one time, redeemed at one time). Great for mutual fund fact sheets, index performance, stocks.
XIRR: Use when there are multiple cash flows (monthly SIPs, irregular investments, partial redemptions). XIRR accounts for the timing of each cash flow. CAGR cannot handle this correctly.

Common CAGR Misconceptions

"CAGR of 25% means consistent 25% every year" — FALSE. CAGR is the geometric average. Years could be +80%, −30%, +45% — the CAGR is still calculated from start to end value only.
"Higher CAGR always means better investment" — FALSE. CAGR ignores volatility. A 25% CAGR investment with 60% drawdowns may not suit a conservative investor even though the numbers look great.