Calculate your annualised (CAGR) and absolute returns to evaluate your portfolio performance accurately.
When evaluating mutual funds, understanding the difference between Absolute Return and CAGR is crucial. Absolute return is the simple percentage increase in your investment, whereas CAGR (Compound Annual Growth Rate) accounts for the time period and provides the annualised rate of growth.
Where:
If you invest ₹1 Lakh and it grows to ₹1.5 Lakhs in 3 years, your Absolute Return is 50%. However, your CAGR (annualised return) is 14.47% p.a.
For investments shorter than 1 year, look at Absolute Returns. For investments longer than 1 year, CAGR is the industry standard as it helps compare performance against other annualised benchmarks like FD or Inflation.