ReckonBoxHow the CAGR calculator works
CAGR, the compound annual growth rate, is the steady yearly rate that would carry a value from its beginning to its ending amount over a period, as if it grew by the same percentage every single year. It turns a bumpy real history into one annual figure you can compare across investments, which is why fund factsheets and annual reports lead with it. Give this calculator two values and a period and it returns that rate.
Three modes cover the questions people actually ask. Growth rate mode takes a beginning value, an ending value, and a period, and returns the CAGR. Future value mode runs the maths backward: from a starting amount and a rate it projects what the value becomes. The third mode converts a total return you already know into an annual one. A value that climbs from 1,000 to 1,500 over three years has a CAGR of 14.5 percent a year.
The CAGR formula
CAGR equals the ending value divided by the beginning value, raised to the power of one over the number of years, minus one. Written out, that is CAGR = (ending / beginning)^(1 / years) - 1. The exponent does the annualising: it asks what single rate, compounded over the whole period, bridges the two endpoints.
Two worked numbers make it concrete. A stock that goes from 10,000 to 16,183 over five years grew at 10.11 percent a year, because 16,183 over 10,000 is 1.6183, and 1.6183 to the power of one-fifth is 1.1011. A fund that doubles from 1,00,000 to 2,00,000 in five years grew at 14.9 percent. The result drops straight out once you have the two values and the count of years.
How to calculate CAGR in Excel or Google Sheets
Both apps compute it four ways, and they all return the same rate. The direct formula mirrors the algebra, and the other three are shortcuts worth knowing.
| Method | Formula | Notes |
|---|---|---|
| Direct | =(ending/beginning)^(1/years)-1 | The formula itself |
| Power | =POWER(ending/beginning, 1/years)-1 | Same maths, named function |
| RRI | =RRI(years, beginning, ending) | One clean function, no exponent |
| Rate | =RATE(years, , -beginning, ending) | Beginning value entered as negative |
Format the cell as a percentage and you are done. RRI is the tidiest, since it takes the three inputs directly and hides the exponent. Microsoft's own help page, oddly, shows none of these and points you at XIRR instead, so the shortcuts above fill a real gap.
Reverse CAGR: projecting a future value
Reverse CAGR works the formula the other way, projecting a future value from a starting amount and a rate: future value equals beginning value times (1 plus CAGR) raised to the years. This is the version people reach for when planning toward a goal, since it answers what a sum becomes if it compounds at an assumed rate. In future value mode here, 1,00,000 compounding at 12 percent for 10 years reaches about 3,10,585, a net gain of 2,10,585 on the original amount.
A quick sanity check comes from the rule of 72: divide 72 by the annual rate for a rough doubling time. At 12 percent that is six years, so over ten years the money should slightly more than treble, which the 3.1 times result confirms.
Turning an absolute return into CAGR
This last mode does something almost no other calculator offers. If you know the total gain but not the annual rate, the absolute return mode annualises it: CAGR equals (1 plus the total return) raised to one over the years, minus one. The same total gain becomes a very different annual rate depending on how long it took.
| Time to earn 100% total | CAGR |
|---|---|
| 3 years | 26.0% |
| 5 years | 14.9% |
| 10 years | 7.2% |
Doubling your money in three years is a strong 26 percent a year; doubling it in ten is 7.2 percent, below what many debt funds target. This is why a headline like "my investment gave 100 percent" means little until you know the years. To measure a single mutual fund lumpsum in rupees with the absolute return and CAGR side by side, the mutual fund return calculator does exactly that.
Why 2010 to 2018 is 8 years, not 9
Count the gaps between the dates, never the calendar years you touch. From the start of 2010 to the start of 2018 there are eight one-year steps, so the number of years in the formula is 8. Slipping in a 9 by counting both endpoints is a genuine spreadsheet mistake, and it quietly understates the rate: the same growth spread over a wrongly longer period looks slower than it was. When you use exact dates, divide the number of days by 365 to get the fractional years.
What CAGR leaves out
A CAGR describes only two points in time, the start and the end, so it says nothing about the road between them. A smooth-looking 12 percent CAGR can hide a 40 percent crash in year two and a sharp recovery afterward, because the metric only sees where the value began and where it landed. It also ignores any money added or withdrawn along the way, which is the job of XIRR once cashflows land on many different dates. CAGR compares single investments over identical periods well, and it is a poor gauge of risk, since two funds with the same CAGR can have wildly different rides. Because these figures are market-linked and not guaranteed, treat the output as a measurement of the past, and check with a SEBI-registered adviser before acting on it.
Frequently asked questions
What is CAGR? CAGR, or compound annual growth rate, is the steady yearly rate that would take a value from its beginning to its ending amount over a period, as if it grew by the same percentage every year. It smooths the bumpy real path into one comparable annual figure, which is why fund factsheets and annual reports quote it.
What is the CAGR formula? CAGR equals (ending value divided by beginning value) raised to the power of one over the number of years, minus one. For example, 1,000 growing to 1,500 over 3 years is (1.5)^(1/3) minus 1, which is 14.5 percent a year.
How do I calculate CAGR in Excel or Google Sheets? The direct formula is =(ending/beginning)^(1/years)-1, formatted as a percentage. You can also use =POWER(ending/beginning, 1/years)-1, or the single-function =RRI(years, beginning, ending), or =RATE(years, , -beginning, ending) with the beginning value entered as a negative. All four give the same rate.
What is a reverse CAGR calculator? A reverse CAGR calculation projects a future value from a known rate, using future value equals beginning value times (1 plus CAGR) raised to the years. In the future value mode here, 1,00,000 growing at 12 percent for 10 years reaches about 3,10,585.
How do I convert an absolute return to CAGR? Treat one plus the total return as the growth factor and annualise it: CAGR equals (1 plus total return) raised to one over the years, minus one. A 100 percent total gain is 14.9 percent a year over 5 years, 26 percent over 3 years, and 7.2 percent over 10, since the same gain spread over more years is a lower annual rate.
What is the difference between CAGR and absolute return? Absolute return is the total percentage gain and ignores time, so a doubling is 100 percent whether it took 3 years or 10. CAGR spreads that gain across the years into an annual rate, which is the only version you can compare fairly between investments of different lengths.
What is the difference between CAGR and XIRR? CAGR assumes one amount invested at the start and one value at the end, so it needs a single lumpsum. XIRR handles many cashflows on different dates, like a SIP or a portfolio with top-ups and withdrawals. Use CAGR for a single buy-and-hold, and XIRR once money went in on multiple dates.
Why is a 2010 to 2018 investment 8 years, not 9? CAGR counts the gaps between the dates, not the calendar years touched. From the start of 2010 to the start of 2018 is 8 one-year gaps, so n is 8. Counting 9 by including both endpoints understates the rate, a common spreadsheet mistake.
What are the limits of CAGR? CAGR describes only the two endpoints and says nothing about the path between them, so a smooth 12 percent CAGR can hide a crash and a recovery. It also ignores interim cashflows and volatility, which is why it works best for comparing single investments over identical periods and reads poorly as a gauge of risk.