Mutual Fund Returns Calculator
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14.47%
Historical Investment Growth Line
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Absolute & Annualized (CAGR) Returns Formula
Computes absolute point-to-point gains and compound annual growth rate for a given period.
Worked Example: ₹1 Lakh becoming ₹1.5 Lakhs in 3 years
CAGR vs Absolute Returns: The Math Error costing Retail Investors Lakhs
Amit bought a sector mutual fund in 2018. In 2024, he checked his dashboard: "Absolute Returns: 60%". He was thrilled. He told his friends his fund was beating his father's FDs. Then he calculated his CAGR (Compound Annual Growth Rate).
Because Amit had held the fund for 6 years, that 60% absolute gain translated to an annualized CAGR of just 8.1%. While it did beat traditional savings, it was far below the 13% average index return during the same period. Amit was taking equity risk for near-debt returns without realizing it.
Absolute return is simple point-to-point growth: `((Current - Invested) / Invested) * 100`. It ignores the factor of time. CAGR calculates the exact annualized growth rate: `((Current / Invested) ^ (1 / Years) - 1) * 100`. If you double your money in 3 years, your CAGR is a stellar 26%. If you double it in 10 years, your CAGR drops to 7.2%.
Always evaluate your mutual funds using CAGR, not absolute returns, especially for holdings older than 12 months. Compare your fund's CAGR against its benchmark index to see if your risk is truly being rewarded.
Frequently Asked Questions
What is the difference between absolute returns and CAGR?
Absolute return is the simple percentage gain on your investment, ignoring the time factor. CAGR (Compound Annual Growth Rate) calculates the annualized rate of return, showing how fast your money grew year-on-year.
When should I use CAGR instead of absolute returns?
For investments held for more than 12 months, you should always use CAGR or XIRR to evaluate performance. Absolute returns are only useful for short-term holdings under 1 year.
Is CAGR the same as XIRR?
Not exactly. CAGR is used for point-to-point calculations (single investment and single payout). XIRR is used for multiple cash flows (like SIPs or irregular buy/sell transactions) where investments happen on different dates.
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