What Is CAGR (Compound Annual Growth Rate)?

CAGR — Compound Annual Growth Rate — is the single annual rate at which an investment would have grown if it compounded steadily over a period. It's the standard way to express a multi-year return as one clean number.

The formula

CAGR = (ending value ÷ beginning value)^(1 ÷ number of years) − 1. For example, if a stock went from ₹100 to ₹200 over 5 years, CAGR = (200÷100)^(1/5) − 1 ≈ 14.9% per year — the steady annual rate that compounds ₹100 into ₹200 in 5 years.

Why it beats a simple average

A simple average of yearly returns ignores compounding and is distorted by volatility — a +50% year followed by a −50% year averages to 0% but actually leaves you down 25%. CAGR captures the true compounded result, which is what actually happened to your money.

Computing it from data

You can calculate a stock's CAGR from its price history — but use the adjusted close for the start and end values so splits and bonuses don't distort it. For funds, trailing returns are provided directly.