Why is CAGR lower than absolute return divided by years?

Because compounding does the work. Earning thirteen percent a year for four and a half years produces more than fifty-eight percent, so the rate needed for a sixty percent gain is lower than the division suggests.

Is the return shown net of the expense ratio?

Yes. Expenses are deducted from NAV daily, so any return you observe is already after them. The figure here shows what they cost in rupees.

Investmentmutual funds

Mutual Fund Returns Calculator

Mutual fund returns as both absolute and annualised figures. A sixty percent gain over four and a half years is not sixty percent a year and not thirteen either, because compounding is not division.

Also called: mf return calculator, cagr calculator.

Annualised return

11.38%

11.38% a year, from an absolute gain of 62.4% over 4.5 years. The two differ because one compounds and the other does not. After exit load you would receive ₹8,12,000, and the expense ratio has cost about ₹44,778 over the holding period.

Absolute return

62.4%

Total gain

₹3,12,000

Net of exit load

₹8,12,000

Cost of the expense ratio

₹44,778

Return before expenses

12.71%

Years to double at this rate

₹6

How this is calculated

An estimate, not an offer or a guarantee. Projected returns assume the rate you entered holds for the whole term, which no market does.

Method and background

This is what the calculation gives for the numbers you entered. It is an estimate, not advice, and it knows nothing about your situation beyond those numbers. Rules for India change on a published schedule; the effective date is shown on every rule-based tool.

How this is calculated

The absolute return is the total gain as a percentage of what you put in. The annualised return, or CAGR, is the constant rate that would have produced the same result compounding annually. Dividing the absolute return by the years is the common error and always overstates: it treats the gain as simple interest when the money was compounding. The expense ratio is deducted daily from the NAV, so the return you see is already net of it, and the figure shown here is what it cost you in money.

the constant annual rate that would take the investment from its cost to its value

V: Current value
P: Amount invested
n: Years

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

five lakh grown to 8.12 lakh

Amount invested: ₹5,00,000
Current value: ₹8,12,000
Years held: 4.5
Expense ratio: 1.2%
Exit load if you sell now: 0%

Annualised return11.38%

(812/500)^(1/4.5) - 1, well below 62.4/4.5

Open this example

no gain means no return

Amount invested: ₹5,00,000
Current value: ₹5,00,000
Years held: 4.5
Expense ratio: 1.2%
Exit load if you sell now: 0%

Annualised return0%

boundary

Open this example

Method and limits

What it assumes

A single lumpsum with no intermediate cash flows.

What it deliberately does not model

For a monthly investment plan or any series of purchases, XIRR is the correct measure and this is not.
Past return says nothing about future return.
Capital gains tax is not deducted here.

Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator

Frequently asked questions

Why is CAGR lower than absolute return divided by years?: Because compounding does the work. Earning thirteen percent a year for four and a half years produces more than fifty-eight percent, so the rate needed for a sixty percent gain is lower than the division suggests.
Is the return shown net of the expense ratio?: Yes. Expenses are deducted from NAV daily, so any return you observe is already after them. The figure here shows what they cost in rupees.