What is the difference between CAGR and XIRR?
CAGR is used for single point-in-time lump sums; XIRR (Extended Internal Rate of Return) is used when multiple periodic cash inflows/outflows occur.
Compound annual growth rate between two investment values.
Determines the Compound Annual Growth Rate, measuring the smoothed annualized return of an investment over multiple years.
CAGR = (Ending Value / Beginning Value)^(1 / Years) - 1
Calculates the constant annual rate of return that would take an investment from its initial value to its final value.
Inputs: Beginning Value = ₹1,00,000 | Ending Value = ₹2,50,000 | Duration = 7 Years
Summary: Initial = ₹1,00,000 | Final = ₹2,50,000 | Annualized CAGR = 13.98%
CAGR is used for single point-in-time lump sums; XIRR (Extended Internal Rate of Return) is used when multiple periodic cash inflows/outflows occur.
Yes, if an investment's ending value is lower than its beginning value, the resulting CAGR will be negative.
An absolute return of 50% over 5 years is only roughly 8.45% CAGR, which might barely beat inflation.