How to calculate CAGR easily
CAGR sands for Compounded Annual Growth Rate. It defines as an average growth rate of an investment that compounds over a period. Consider the timeline of a person who invested his money for 4 years in a Systematic Investment Plan mutual fund scheme. Here is the time period depicted. Here in the year 2010, his sales profit is 5 lakh. After 1 year, his sales figure reached 12 Lakhs. So from 2010 to 2011, his growth rate is 7 Lakh at 140% growth rate. Then from 2011 to 2012, his sales growth dropped from 12 Lakhs to 10 Lakhs. Here 2 Lakh depreciation has occurred at a percentage dip of 17 percentage. In the same way, from 2012 to 2013, a growth rate of 50 percent occurred that raised from 10 Lakhs to 15 Lakhs. Finally, from 2013 to 2014, again sales profit dropped from 15 Lakhs to 10 Lakhs at a declined rate of 33 percent. Here, you cannot find a single average growth rate in last 4 years, due to varying nature of Sales profit. However, CAGR does. It finds out...