What is CAGR?
A fund’s actual year-to-year returns are lumpy - up 30% one year, down 8% the next, flat the year after. CAGR collapses all of that into one number: the constant annual rate that, compounded every year, would take the starting value to the ending value over the period measured. It’s the standard way funds, benchmarks, and indices report multi-year performance, precisely because a single trailing-return percentage hides how bumpy the path actually was.
CAGR = (Ending Value / Starting Value)^(1 / Number of Years) - 1
CAGR tells you the smoothed rate, not the real path - two funds with identical 3Y CAGR can have had very different volatility getting there. Pair it with a risk metric like Standard Deviation or Max Drawdown to see which one actually mattered.
Real comparison across 6 funds
CHART
3Y CAGR - 6 real funds
Compounded annual growth rate over the trailing 3-year window, as of 2026-08-31.
Funds compared: Parag Parikh Flexi Cap · DSP Value · ICICI Prudential Value · SBI Focused · Parag Parikh ELSS Tax Saver · SBI Multicap
Reading the spread
Across these 6 funds, 3-year CAGR runs from 11.03% (Parag Parikh ELSS Tax Saver) to 17.92% (DSP Value), a gap of 6.88%. The middle value is 14.76%, with 3 of 6 above it. The highest reading is 1.6 times the lowest, so the choice of fund changes this number a lot. Taking higher as better, DSP Value leads and Parag Parikh ELSS Tax Saver trails on this measure alone.
How to use it in practice
Use CAGR to compare returns across different holding periods on one footing. A fund that doubled in five years and another that doubled in ten are easy to compare once both are converted to a yearly rate. Always set a fund’s CAGR beside its benchmark and the category median over the same period; a number on its own tells you little.
Common mistakes
CAGR smooths over everything that happened in between, so two funds with the same CAGR can have had very different ride quality. It is also very sensitive to the start and end dates: a window that begins at a market low flatters any fund. And it applies to a lumpsum held throughout; for regular investments use XIRR. Never treat a past CAGR as a forecast.
Frequently asked questions
What is a good CAGR for a mutual fund?
There is no fixed number. It is meaningful only against a reference: the fund’s benchmark and its category median over the same period. A fund that beats both consistently is doing its job.
Is CAGR the same as average annual return?
No. The simple average of yearly returns ignores compounding and overstates growth when returns vary. CAGR is the single steady rate that would produce the same ending value.
Why do I see different CAGRs for the same fund?
Because the starting and ending dates differ. CAGR over three years from different start dates can differ widely, which is why rolling returns are a fairer summary.
WHAT THIS MEANS FOR YOU CAGR over a short or unusual window (e.g. a 3-year period that happened to start right after a market crash) can look flattering for reasons that have nothing to do with the manager’s skill. Always check the window dates, and compare a fund’s CAGR to its own benchmark’s CAGR over the identical dates - see Beat Benchmark % - rather than judging it in isolation.
METHODOLOGY 3-year CAGR computed from each fund’s own daily NAV history as of 2026-08-31, not a fact-sheet-reported figure. Data: Punji NAV history. Not investment advice.