What is the CAGR formula?

CAGR = (ending value ÷ starting value)^(1 ÷ years) − 1. Example: ₹1,50,000 growing to ₹2,40,000 over 3 years → (2.4 ÷ 1.5)^(1/3) − 1 = 16.96% per year. Fractional years work fine — 18 months is 1.5.

What is the difference between CAGR and absolute return?

Absolute return ignores time: ₹1 lakh to ₹1.6 lakh is 60% whether it took two years or ten. CAGR spreads that growth over the period with compounding — 26.5% a year if it took two years, 4.8% if it took ten. Only the annualised figure makes different periods comparable.

What is a good CAGR for a trading strategy in India?

There is no honest universal benchmark, but context helps: the NIFTY 50’s long-run total return has historically been in the low-to-mid teens. A strategy backtest showing far higher CAGR deserves scrutiny of its drawdown, its costs and its overfitting risk before belief — sustained high CAGR with shallow drawdowns is exactly the combination most often produced by curve-fitting rather than edge.

When should I use XIRR instead of CAGR?

Whenever money entered or left during the period — SIPs, deposits into a trading account, withdrawals. CAGR assumes one lump sum at the start; XIRR weights each cash flow by its timing. For a no-flow backtest equity curve, CAGR is exactly right.

Free tools · Returns

CAGR calculator — the annualised truth about a return

Last updated: September 2026

Short answer

CAGR (compound annual growth rate) = (ending value ÷ starting value)^(1 ÷ years) − 1. Growing ₹1,00,000 to ₹2,00,000 over five years is a 100% absolute return but a 14.87% CAGR — the constant annual rate that would produce the same result with compounding. CAGR is the standard way to compare returns earned over different time periods on one scale.

Starting value (₹) Ending value (₹) Period (years)

CAGR

—

Absolute return

—

Growth multiple

—

Reference: years to double, triple and 10× at a given CAGR

Years = ln(multiple) ÷ ln(1 + CAGR). The Rule of 72 (72 ÷ rate) is the mental shortcut for doubling.

CAGR	Years to 2×	Years to 3×	Years to 10×
8%	9	14.3	29.9
10%	7.3	11.5	24.2
12%	6.1	9.7	20.3
15%	5	7.9	16.5
18%	4.2	6.6	13.9
20%	3.8	6	12.6
25%	3.1	4.9	10.3

“Doubled in five years” and “up 40% in eighteen months” cannot be compared until both are annualised — which is all CAGR is: the steady yearly rate that compounds to the same destination. It is the number that lets a trading strategy, an index fund and a stock be laid side by side honestly.

Enter starting value, ending value and the period below. The calculator returns CAGR, the absolute return, and the growth multiple.

Why annualising changes the picture

Compounding is nonlinear, so intuition misleads: doubling in five years is under 15% a year; tripling in ten years is under 12%. In the other direction, rates that sound modest compound into startling multiples — 15% a year for twenty years is a 16× multiple. CAGR converts between these two languages exactly, which is why every fund factsheet and every serious backtest reports it.

The period matters as much as the number. A 40% CAGR measured over eight months of a bull market says almost nothing — short windows are dominated by luck and regime. The same figure sustained across five years including a crash is a different claim entirely. When comparing anything by CAGR, compare the measurement windows first.

CAGR’s blind spots — volatility and cash flows

CAGR sees two endpoints and nothing between. A strategy that glided to 15% and one that visited a 60% drawdown en route to the same 15% carry equal CAGRs — which is why CAGR belongs beside risk measures, never alone: max drawdown for the worst experience, Sharpe for return per unit of volatility. A high-CAGR equity curve you would have abandoned mid-drawdown was never really available to you.

CAGR also assumes no money moved in or out. If you added or withdrew capital during the period, point-to-point CAGR misattributes those flows to performance — XIRR is the right tool there. For a trading account, compute CAGR on a period with no deposits or withdrawals, or strategy-level from a backtest’s equity curve. INDfolio AI reports CAGR alongside Sharpe, Calmar and max drawdown on every backtest, precisely so the annualised number is never read without its risk context.

These calculators are free, run entirely in your browser, and store nothing. They produce estimates for NSE trades based on published rates and standard formulas — not investment advice, and not a substitute for your broker’s contract note. INDfolio AI builds algo trading software; the honest connection is that our backtests apply this same cost arithmetic to every simulated trade.