What Is CAGR in Mutual Funds

CAGR or Compounded Annual Growth Rate is a measure to ascertain the long term performance of a Mutual fund. It is used to calculate the average growth rate of the fund for a period of more than 1 year.

For example : If you invested Rs 1 lakh in a mutual fund scheme and the market value of your investment grew to Rs 1.4 lakhs after 3 years, then your CAGR is 11.9%.  CAGR in the shorter term cannot be used as a yardstick of performance however if you want to guage the long term average return of a fund, CAGR is an apt measure.