Financial glossary
CAGR
CAGR, or compound annual growth rate, is the constant annual rate that connects a beginning value to an ending value over a period.
What CAGR means
Compound annual growth rate expresses an endpoint change as one smooth annual compound rate. It is useful when comparing growth over periods of different lengths, provided the underlying values are comparable.
How CAGR is calculated
Divide the ending value by the positive beginning value, raise that ratio to one divided by the number of years, subtract one, and convert the result to a percentage.
Simple example
A value that rises from ₹1,00,000 to ₹1,61,051 over five years has a CAGR of 10%. Its total return is about 61.05%: total return measures the full endpoint change, while CAGR annualises that change over five years.
Negative CAGR and complete loss
If the ending value is lower than the beginning value, CAGR is negative. If the ending value is zero, the endpoint investment has lost 100% of its beginning value.