CAGR how to calcullate Compound Annual Growth Rate with formula

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Marketopedia / Importance of Personal Finance / CAGR how to calcullate Compound Annual Growth Rate with formula

XIRR and CAGR are the same

Finally, I would like to mention that both XIRR and CAGR are utilised to determine the rate of return over a multi-year period. XIRR is essentially a modified version of CAGR.

XIRR is a useful tool when making a SIP investment. When looking at lump sum investments that were made over the course of one year, XIRR and CAGR should show comparable results.

Let’s take an example –

Investment date – 3rd Jan 2018

Investment amount – Rs.1,00,000/-

Today’s date – 3rd Jan 2020

Current value of investment – Rs.1,25,000/-

The CAGR works out to –

[1,25,000/1,00,000]^(1/2)-1

= 11.8%

If you run the XIRR function on the same set of numbers –

You reach the same conclusion. I trust you comprehend the logic behind XIRR and CAGR.

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