Work out the compound annual growth rate of any investment — the honest, time-adjusted way to compare returns across stocks, funds and portfolios.
A “150% return” sounds impressive until you learn it took 12 years — that’s just 7.9% a year, below what an index fund delivered. CAGR puts every investment on the same yearly scale so you can compare a 3-year stock trade against a 10-year mutual fund honestly. It’s the metric used in every fund factsheet and analyst report.
Long-run Indian benchmarks: Nifty 50 ≈ 12% (total return), fixed deposits ≈ 6-7%, gold ≈ 9-10%, real estate ≈ 8-10% (city-dependent). If your stock portfolio’s CAGR trails the Nifty over 5+ years, an index fund would have done better with less effort — check each holding’s health on VestAI’s free stock pages.
CAGR (Compound Annual Growth Rate) is the constant yearly rate at which an investment would have grown to reach its final value. It smooths out volatility, making it the standard way to compare returns across different investments and timeframes — a stock that doubled in 6 years has a CAGR of about 12.2%, regardless of the path it took.
CAGR = (Final Value ÷ Initial Value)^(1 ÷ years) − 1. For example, ₹1 lakh growing to ₹2.5 lakh over 5 years: (2.5)^(1/5) − 1 = 20.1% per year.
The Nifty 50 has delivered roughly 12% CAGR over the long term (total returns). Beating 15% consistently over 10+ years puts a portfolio in the top tier; the best long-term investors compound at 18-25%. Be sceptical of anyone promising more — high CAGRs over short periods usually reflect luck or risk, not skill.
Absolute return ignores time: ₹1 lakh → ₹2 lakh is "100%" whether it took 3 years or 15. CAGR annualises it: 26% p.a. over 3 years, but only 4.7% p.a. over 15 years — worse than a fixed deposit. Always compare investments on CAGR, not absolute return.
Not directly — CAGR assumes a single initial investment. SIPs have multiple cash flows at different times, so the correct metric is XIRR. For a quick SIP projection, use our SIP calculator instead.
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