Why is the 5-year CAGR on funds often less than the 3-year CAGR?

Transcript: That is purely by chance. 3 years ago, the market was very low but 5 years ago it was relatively better. The returns you see are trailing returns which compare today's NAV with the NAV three years ago or five years ago. So, the 5-year return looks relatively poor. If you had invested three years ago you would've gotten a CAGR of around 25%. However if you had invested 5 years ago, you would have gotten lower returns because of the first two years when the market was sluggish. However, these returns keep changing as time passes by. Over a very long period of time of 10 years or more, the returns become very stable as they reflect a full market cycle.

This article was originally published on August 30, 2017.