Pick your Return

A journey through the world of mutual funds, or for that matter any financial instrument will reveal that it's possible to calculate returns in many ways. Each of these returns has its particular use and implication. Let us take a look at different types of returns. If an investment of Rs 1,000 was made five years ago and it has grown to Rs 1,300 today, then the absolute gain would be Rs 300—a 30 per cent growth on initial investment. A 30 per cent return on investment would normally qualify as good but for the fact that it was realised over five years. If you want to know how much the investment has grown on a yearly basis, you will have to take a look at the compounded annualised growth rate (CAGR). The CAGR—also called the compounded annualised return or just annualised retur

This article was originally published on May 01, 2003.