What Is CAGR? The Real Way to Compare Investment Returns

Investment · 6 Dec 2025 · 5 min read

CAGR (Compound Annual Growth Rate) is the single most useful number when comparing investments of different durations. Unlike absolute returns, it tells you the steady annualised rate at which your money grew.

The formula

CAGR = (End / Start)^(1/years) − 1. ₹1 lakh becoming ₹2 lakh in 6 years = (2)^(1/6) − 1 = 12.25% CAGR.

Why absolute returns mislead

‘My fund gave 100%’ means nothing without the time taken. 100% in 6 years is great; 100% in 20 years is poor (3.5% CAGR).

CAGR vs XIRR

CAGR works for one-time (lumpsum) investments. For SIPs and irregular cashflows, use XIRR — most platforms show it on your statement.

Realistic Indian benchmarks

Equity funds: 12-14% long-term CAGR. Hybrid: 9-11%. Debt: 6-8%. Anything ‘guaranteed > 15%’ is almost always a scam.

Final word

Use our CAGR Calculator to convert any pair of (start value, end value, years) into a clean CAGR figure for fair comparison.