Compound Annual Growth Rate (CAGR): 5 important things investors must know
1.CAGR is the average annualised rate at which an investment’s value changes over a period of time.2.If a stock appreciates from Rs.100 to Rs.121 over two years, its CAGR will be calculated as 10%.
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4.Its CAGR will still be 10% per annum, given the start and end values. Hence, CAGR can hide volatility in the interim and present a picture of steady growth.
5.Investors using advertised CAGR should ask for risk, rather than assuming the rate to be an annual constant.
Content courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.
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This story originally appeared on: India Times - Author:Faqs of Insurances
