It gives the most accurate and reliable results to calculate the returns of assets, portfolio, and other securities whose Value can rise or fall over time. CAGR shows the average returns that investment would earn annually, over the period of investment.ĬAGR is used to measure and compare the past performance of investments or speculate their future returns.

The reason for this, higher return in a year could be due to an exceptional or extraordinary gain, but a consistent return is what an investor should rely upon. Typically, CAGR is the rate of return on investment from the beginning (acquisition) to end (sale), assuming all the profits reinvested.ĬAGR overrides the significance to be placed upon annual return. What is CAGR?ĬAGR stands for “Compound Annual Growth Rate”. So, let’s dive into the topic and understand the CAGR. The application of Compound Interest expands to the entire stream of financial management and investment.Īfter the immense growth in the stock market participation, investors are now keen to know more about the finance and the working of the stock market.ĬAGR is one of the widely used terms in the stock market, and understanding it is crucial. Since the last decade, people found post office savings beneficial and profitable the reason behind such a feeling was compound interest. Knowingly or unknowingly, even our parents used the concept of compound interest. He who understands it earns it and he who doesn’t pay it.” – Albert Einstein. “Compound interest is the eighth wonder of the world.

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