What is the difference between CAGR, absolute return and XIRR?

Absolute return is the total percentage gain, ignoring time. CAGR converts it into a yearly rate for a single investment held over a period. XIRR does the same for a series of investments on different dates, such as a SIP. Use CAGR for a lumpsum and XIRR for a SIP.

Why does CAGR not work for a SIP?

Because a SIP has many starting dates, and each instalment has compounded for a different length of time. Treating the total as if invested on day one understates the true rate. Your statement or the fund house's portal reports XIRR for SIPs.

It depends on the asset and the period. Over long periods, broad Indian equity indices have compounded at roughly 11% to 13% a year with large swings in between, while bank deposits have paid 5% to 8%. Past figures do not indicate future returns.

What does CAGR leave out?

The path. Two investments can have the same CAGR with very different journeys, one steady and one that fell 40% midway. Look at the year-by-year returns, the largest fall and the riskometer alongside it.

How do I calculate CAGR in Excel?

Use =RRI(years, starting value, ending value), or =(ending/starting)^(1/years)-1. For a SIP or any series of dated cash flows, use XIRR with the dates and amounts, investments negative and redemptions positive.

Financial calculatorsCAGR Calculator

CAGR Calculator

Find the yearly growth rate of an investment between two values.

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Initial investment₹1 LFinal value₹2.5 LTime period5 yr

Absolute return: 150.0%
Total gain: ₹1.5 L
CAGR: 20.11%; Compound annual growth rate

Initial investment₹1 L 40%
Total gain₹1.5 L 60%

CAGR is the smoothed yearly growth rate; it ignores the ups and downs in between.

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How this calculator works

Enter what you invested, what it is worth now and the years in between. The calculator returns the compound annual growth rate, the single yearly rate that would take the first number to the second. CAGR lets you compare investments held for different periods on one scale.

What is a CAGR calculator?

A CAGR calculator finds the compound annual growth rate of an investment from its starting value, its ending value and the years in between: the single yearly rate that would have taken the first number to the second. It lets you compare investments held for different periods on one scale.

How is it calculated?

CAGR = (Ending value ÷ Starting value)^(1 ÷ years) − 1

Starting value is what you invested, once
Ending value is what it is worth now, or when sold
Years can include fractions: 30 months is 2.5 years

₹5 lakh that became ₹12 lakh in 8 years

Starting value	₹5,00,000
Ending value	₹12,00,000
Years	8
Absolute return	140%
CAGR	11.56% a year

The same 140% over 12 years would be a CAGR of 7.6%: the period changes the verdict.

Questions people ask

Absolute return is the total percentage gain, ignoring time. CAGR converts it into a yearly rate for a single investment held over a period. XIRR does the same for a series of investments on different dates, such as a SIP. Use CAGR for a lumpsum and XIRR for a SIP.
Because a SIP has many starting dates, and each instalment has compounded for a different length of time. Treating the total as if invested on day one understates the true rate. Your statement or the fund house's portal reports XIRR for SIPs.
It depends on the asset and the period. Over long periods, broad Indian equity indices have compounded at roughly 11% to 13% a year with large swings in between, while bank deposits have paid 5% to 8%. Past figures do not indicate future returns.
The path. Two investments can have the same CAGR with very different journeys, one steady and one that fell 40% midway. Look at the year-by-year returns, the largest fall and the riskometer alongside it.
Use =RRI(years, starting value, ending value), or =(ending/starting)^(1/years)-1. For a SIP or any series of dated cash flows, use XIRR with the dates and amounts, investments negative and redemptions positive.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Figures are illustrations at an assumed rate, not a forecast. Talk to us to match a plan to your goals.