Absolute Return vs CAGR

Two ways to say the same thing

₹1 lakh becomes ₹4 lakh in 6 years. You can describe that as:

• A 300% absolute (total) return
• A 25.99% CAGR

Both are correct. Both describe the same outcome.

When to use which

Use absolute return when:

• The horizon is fixed and short.
• You just want to know the total change.
• You are reporting after the fact.

Use CAGR when:

• You are comparing investments held for different periods.
• You want to think in 'per-year' terms.
• You want a rate you can plug into a future projection.

The trap

Mutual funds and indices often quote both: "10-year CAGR 12%" and "10-year return 210%". They are the same statement, expressed differently. Marketing tends to pick whichever number looks bigger for the headline.

Conversion math

CAGR  = (1 + Absolute) ^ (1 / Years) − 1
Absolute = (1 + CAGR) ^ Years − 1