To calculate the returns on your mutual fund, you can either use the absolute returns formula or the compounded annual growth rate (CAGR) formula. The first does not take the period of investment into consideration and the second includes the period of investment and tells you how much your investment earned you on a yearly basis, irrespective of the yearly performance of the fund. CAGR is similar to the compound interest rate formula. Performance data shown in factsheets and others for periods exceeding one year are expressed in CAGR. Note CAGR is used only for point to point returns; you cannot use CAGR for SIPs, systematic withdrawal plans (SWPs), etc.
