How is CAGR different from absolute return?

Absolute return is the total percentage gain over the whole period; CAGR converts that into an annualised, compounding rate, making investments of different durations comparable.

When should I use XIRR instead of CAGR?

Use CAGR for a single lump-sum investment. Use XIRR when there are multiple cash flows at different dates, like a SIP.

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Nifty 5022,520.451.3%Sensex72,472.331.23%Bank Nifty55,256.651.36%

Nifty 5022,520.451.3%H 22,580.75 · L 22,294.75as of 09 Oct, 3:31 PM IST|Sensex72,472.331.23%H 72,669.2 · L 71,739.49as of 09 Oct, 3:32 PM IST|Bank Nifty55,256.651.36%H 55,419.3 · L 54,617.2as of 09 Oct, 3:31 PM IST|USD / INR₹96.730.05%H ₹96.78 · L ₹96.73as of 9:00 AM IST|Gold Intl (10g)₹1,31,124.371.43%H ₹1,31,634.4 · L ₹1,29,252.19as of 10 Oct, 2:29 AM IST|Silver Intl (1kg)₹1,89,855.582.73%H ₹1,91,136.88 · L ₹1,84,885.9as of 10 Oct, 2:29 AM IST|Crude WTI₹8,884.650.39%H ₹8,914.64 · L ₹8,706.67as of 10 Oct, 2:29 AM IST|Bitcoin₹80,06,3500.68%H ₹80,33,645.23 · L ₹79,79,054.77as of 10 Oct, 11:28 AM IST|Ethereum₹2,41,4250.37%H ₹2,41,868.71 · L ₹2,40,981.29as of 10 Oct, 11:28 AM IST|Nifty 5022,520.451.3%H 22,580.75 · L 22,294.75as of 09 Oct, 3:31 PM IST|Sensex72,472.331.23%H 72,669.2 · L 71,739.49as of 09 Oct, 3:32 PM IST|Bank Nifty55,256.651.36%H 55,419.3 · L 54,617.2as of 09 Oct, 3:31 PM IST|USD / INR₹96.730.05%H ₹96.78 · L ₹96.73as of 9:00 AM IST|Gold Intl (10g)₹1,31,124.371.43%H ₹1,31,634.4 · L ₹1,29,252.19as of 10 Oct, 2:29 AM IST|Silver Intl (1kg)₹1,89,855.582.73%H ₹1,91,136.88 · L ₹1,84,885.9as of 10 Oct, 2:29 AM IST|Crude WTI₹8,884.650.39%H ₹8,914.64 · L ₹8,706.67as of 10 Oct, 2:29 AM IST|Bitcoin₹80,06,3500.68%H ₹80,33,645.23 · L ₹79,79,054.77as of 10 Oct, 11:28 AM IST|Ethereum₹2,41,4250.37%H ₹2,41,868.71 · L ₹2,40,981.29as of 10 Oct, 11:28 AM IST|

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Compound Annual Growth Rate (CAGR)

The smoothed annual growth rate of an investment over time.

Definition

Compound Annual Growth Rate (CAGR) is the constant annual rate at which an investment would have grown if it compounded steadily over a period. It smooths out year-to-year volatility to give a single 'average' annual return.

Formula

CAGR = (Ending Value / Beginning Value)^(1 / years) − 1

Example

₹1,00,000 growing to ₹2,00,000 over 6 years has a CAGR of about 12.2% per year.

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Related terms

XIRR SIP Alpha Beta

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