CAGR vs absolute return: don't get fooled

Absolute return is simply how much your money grew in total: (final − invested) ÷ invested. CAGR (Compound Annual Growth Rate) converts that into a steady per-year rate, accounting for compounding.

Why the difference matters

A fund that doubled your money (100% absolute return) sounds fantastic — but if it took 10 years, that's only ~7.2% CAGR. Another fund up 60% in 4 years is actually better (~12.5% CAGR). Always compare investments using CAGR (or XIRR for SIPs), never raw absolute numbers over different periods.

The formula

CAGR = (Final ÷ Initial)^{(1 ÷ years)} − 1. It assumes smooth growth, so it hides year-to-year volatility — a fund can have a nice CAGR yet a bumpy ride.

→ Compute it instantly in the CAGR calculator.