How it works
CAGR reverses the compound growth formula. Instead of asking what a rate produces, it asks what rate would have been needed to get from the starting value to the final value in the given time.
The calculation takes the growth multiple — final value divided by initial value — and raises it to the power of one divided by the number of years. Subtracting one turns the result back into a rate.
More detail
The output is deliberately a single smoothed rate. Two investments that both grew from ₹1 lakh to ₹2 lakh in five years have the same CAGR even if one rose steadily and the other fell 40% before recovering.
CAGR can be negative. If the final value is below the initial value the rate comes out below zero, which is the correct way to describe an annualised loss.
To project forwards at a chosen rate instead of measuring backwards, use the lumpsum calculator.
To judge whether a rate actually beat inflation over the same period, compare it with the inflation calculator.