CAGR
- Compounded annualized growth rate (CAGR) is the year-on-year compounded growth. In other words, it is the annual compound interest.
Example
- Example: If the value of an investment of Rs 12,000 is Rs 22,991 after 5 years, we can evaluate the CAGR as follows:
XIRR
- Extended internal rate of return (XIRR) is a measure of return used when multiple investments are made at different points of time
- When multiple investments are made, the CAGR is different for each investment.
- In case of XIRR, each investment is perceived to grow at the same CAGR.
- Thus, XIRR is the common adjusted CAGR at which all investments are perceived to grow
Example
Assuming, an annual SIP of Rs 12,000 for 12 years, this is the respective CAGR that we get:
