What's a good CAGR for a mutual fund?

Over long horizons (10+ years), diversified equity mutual funds have historically delivered around 11-13% CAGR. Balanced (hybrid) funds typically deliver 9-10%, debt funds 6-8%, and index funds tracking the Nifty 50 or Sensex have averaged 12-13% over rolling 15-20 year periods. CAGR below the inflation rate (around 5-6%) means real wealth erosion. Above 15% sustained over 10+ years is exceptional and rare — be skeptical of any product claiming consistent 20%+ CAGR.

CAGR vs XIRR — when do I use which?

Use CAGR when there is exactly one initial investment growing to one final value over one time period — for example, a lumpsum mutual fund investment, a fixed deposit, or buying and later selling a single stock. Use XIRR when there are multiple cashflows on irregular dates — for example a SIP (where you invest a fixed amount every month), additional lumpsum top-ups, or partial withdrawals. XIRR is essentially CAGR generalized to handle a stream of dated cashflows.

Can CAGR be negative?

Yes. If the final value is less than the initial value, CAGR is negative — it represents the constant annual rate at which the investment lost value. For example, ₹1,00,000 declining to ₹50,000 over 5 years is a CAGR of −12.94%. Equity investments often show negative CAGR over short horizons (1-3 years) during market downturns but typically recover over longer periods. A persistently negative long-horizon CAGR usually signals a fundamentally underperforming asset.

How is CAGR different from average annual return?

CAGR is a geometric mean — it accounts for compounding, so it correctly reflects the actual rate at which money grows over time. Average annual return is usually the arithmetic mean of yearly returns, which overstates true growth because it ignores volatility. For example, an investment that gains 50% in year 1 and loses 50% in year 2 has an average annual return of 0%, but its CAGR is actually −13.4% (because ₹100 → ₹150 → ₹75). Always prefer CAGR for comparing multi-year investment performance.

CAGR Calculator — Compound Annual Growth Rate Calculator

CAGR

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CAGR Calculator

Calculate the Compound Annual Growth Rate (CAGR) for any investment — given initial value, final value, and time period. Shows annualized return, total absolute return, and a year-by-year growth curve.

Reviewed by the CalculatorKosh Editorial TeamUpdated June 2026Free · No sign-up

Investment Details

Initial investment

₹

₹1₹1000 Cr

Final value

₹

₹1₹1000 Cr

Time period

years

0.1 yrs50 yrs

0.5 yr25 yrs50 yrs

Drag sliders to explore different scenarios

Time Period10 yrs

1 yrs40 yrs

What-If CAGR

11.61%

CAGR

(₹1,00,000 grew to ₹3,00,000 over 10 years)

Gain: ₹2,00,000

Absolute return

200.00%

Absolute gain

₹2.0 L

Multiplier

3.00×

Why CAGR ≠ absolute return

Your money grew 200% in total — but spread over 10 years, the annualised return is only 11.61%. CAGR shows the time-adjusted growth rate, which is what you'd compare to a fixed-return benchmark like an FD.

Projected value at 11.61% CAGR

Drag sliders to explore different scenarios

Time Period10 yrs

1 yrs40 yrs

What-If CAGR

11.61%

How It Works

CAGR (Compound Annual Growth Rate) is the single constant annual rate that would have grown your initial investment into the final value, assuming it compounded steadily every year. It is the standard way to measure and compare returns across mutual funds, stocks, gold, real estate, and fixed deposits — because it normalises everything to an apples-to-apples annual rate.

CAGR Formula

CAGR = (Final Value / Initial Value)^{1 / years} − 1

The result is a decimal — multiply by 100 to express as a percent. For example, ₹1,00,000 growing to ₹3,00,000 over 10 years gives a CAGR of (3)^0.1 − 1 = 0.1161 = 11.61%.

Why CAGR is not the same as absolute return

Absolute return (also called point-to-point return) is just the total percentage gain — ₹1L to ₹3L is a 200% absolute return. But spread over 10 years, the annualised compounding rate is only 11.61%. CAGR is the rate you would need to earn every single year to end up at the same final value — which is what you actually compare against an FD, a bond yield, or another fund.

When CAGR is the wrong tool

CAGR only works when there is exactly one initial investment, one final value, and one time period. If you invested through a SIP (a fresh contribution every month), did a top-up halfway through, or made partial withdrawals, CAGR cannot represent the actual return — use XIRR instead. XIRR is the generalisation of CAGR for irregular cashflows on arbitrary dates.

Frequently Asked Questions

CAGR (Compound Annual Growth Rate) is the constant annual rate at which an investment would have grown if it compounded steadily over the full time period. Absolute return is the total percentage gain or loss from start to end with no time adjustment. A ₹1,00,000 investment that grew to ₹2,00,000 over 5 years has a 100% absolute return but only a 14.87% CAGR — the time-adjusted rate that lets you compare it fairly against an FD or any other annual-rate benchmark.