What is CAGR in mutual fund and stock market?
CAGR (Compound Annual Growth Rate) is the annual growth rate of an investment over a specified period, assuming profits are reinvested. It smooths out volatility to give a single annual rate of return, making it the best metric to evaluate mutual fund or equity portfolio performance.
What is the difference between CAGR and absolute return?
Absolute return measures total percentage gained without considering time. CAGR provides an annualised return per year. CAGR is better for comparing investments held for different time periods.
What is the difference between CAGR and XIRR in mutual fund India?
CAGR is used for point-to-point lump sum investments. XIRR is used when there are multiple cash flows at irregular intervals, such as SIP investments or staggered withdrawals.
What is a good CAGR for mutual fund or stocks in India?
Historically, the Nifty 50 has delivered around 12-14% CAGR over 10 years. A good expectation for large-cap mutual funds is 12%, while mid-cap and small-cap funds may target 15-18% CAGR over a 5 to 10-year horizon.
How to calculate CAGR in Excel?
Use the RRI function: =RRI(nper, pv, fv) where nper is the number of years, pv is the initial value, and fv is the final value. Or use the formula: =(FV/PV)^(1/nper)-1.
What are the limitations of CAGR?
CAGR hides volatility. Two investments with the same CAGR can have very different risk profiles. It assumes smooth growth and does not reflect year-to-year fluctuations or investment risk.
How to use a reverse CAGR calculator?
A reverse CAGR calculator works backwards - enter the final value, CAGR %, and time period to find the initial investment required. Very useful for goal-based financial planning, e.g., "I need Rs. 50 lakh in 10 years at 12% CAGR - how much should I invest today?"
What is the CAGR formula with example in India?
CAGR formula = (Ending Value / Beginning Value)^(1 / Years) - 1. Example: Rs. 1,00,000 grows to Rs. 2,00,000 in 5 years, so CAGR = (2/1)^(0.2) - 1 = 14.87% per year.
Can I use a CAGR calculator for SIP returns?
CAGR works best for lump sum investments (single start + end value). For SIPs with multiple monthly cash flows, use an XIRR calculator for accurate annualised returns.
What is the difference between CAGR and IRR?
CAGR measures growth between two specific points for a single investment. IRR (Internal Rate of Return) handles multiple cash flows over time - better for business projects or staggered investments.