CAGR RETURN
(Compound Annual Growth Rate)
Let’s explain you the concept of CAGR in the simplest manner
Suppose you sent your 1 rupee in the market to work for you, that 1 rupee worked Hard and came back to you with another 1 rupee. Now you have total 2 rupees, now next time you sent your 2 rupees in the market to work for you, they worked hard and came back to you with additional 1.5 rupees. Now you have total 3.5 rupees. Next time when they will go to work, they will be a team of 3.5 rupees. So gradually your team of rupees will keep on expanding as there are more and more rupees at work and they will bring more and more rupees as their size grows, it’s actually a teamwork. each and every rupee at work and it helps the team of rupees to keep growing. CAGR return denotes that by how much percentage your team of rupees is growing every year!
Let me give you one more example, in childhood we used to play one game. The player whose turn was there needs to run and touch other running players. Once
the player touches any running player, the running player is called out and then they form a team of 2 and then they start running together to touch other running players, and when they touch other running player they form a team of 3, and start running together to catch remaining running players one by one and this goes on and as the team gets bigger and bigger it becomes easier to catch the running players. Hope you had played this game in childhood.
Same way when your team of rupees become big it becomes easier to add more and more rupees to your team and this goes on and that is called power of compounding.
It is a very important parameter.
And yes, this parameter is meaningful for portfolios that are at least 3 years old.
Just remain invested, believe in India growth story. Keep on investing in a phased manner in high quality growing companies of our beloved India. The next 4 decades belong to our beloved India, and we all are to create the biggest wealth of our time.
