Want best return from stocks, mutual fund? Understand CAGR

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Aug 30, 2024, 06:33:27 PM IST

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What is CAGR? CAGR is the average annualised rate at which an investment’s value changes over a period of time. Text: Centre for Investment Education and Learning (CIEL)

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How is CAGR calculated? If a stock appreciates from Rs 100 to Rs 121 over two years, its CAGR will be calculated as 10%.

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Understand CAGR In reality, the stock might not have moved from Rs 100 to Rs 121 at a constant rate. It could have increased to Rs.140 in the first year and fallen to Rs 121 in the second year.

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How CAGR can help you Its CAGR will still be 10% per annum, given the start and end values. Hence, CAGR can hide volatility in the interim and present a picture of steady growth.

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Check CAGR carefully Investors using advertised CAGR should ask for risk, rather than assuming the rate to be an annual constant.

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Want best return from stocks, mutual fund? Understand CAGR

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