CAGR (Compound Annual Growth Rate)
✓ Last verified 14 Sep 2026
The short version
CAGR is the single, smoothed annual growth rate that would take an investment from its starting value to its ending value over a period, assuming steady compounding - it hides the actual year-to-year ups and downs.
If ₹1 lakh grows to ₹2 lakh over 6 years, the CAGR is the constant annual rate that would produce that same result if growth had been perfectly smooth every year - useful for comparing investments held for different lengths of time on a like-for-like basis. Its key limitation: real returns are rarely smooth, so CAGR can mask a genuinely volatile ride (a fund that lost 20% one year and gained 50% the next can show the same CAGR as one that grew steadily) - useful for comparing endpoints, not for understanding the journey between them.
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