What is CAGR in mutual funds and why does it matter? MintGenie explains
The main goal of investing in mutual funds is to generate substantial returns and construct a prosperous investment portfolio. Mutual funds provide several benefits that render them a favoured option for amassing long-term wealth, including:
Diversification: Mutual funds spread their investments across a range of securities, mitigating risk. If one security underperforms, others may still yield positive results.
Professional management: Skilled investment managers oversee mutual funds, leveraging their knowledge and expertise to make well-informed investment choices.
Affordability: Mutual funds offer cost-effective investment options, making them accessible to investors across various income brackets.
Liquidity: Mutual funds are highly liquid investments, thus, allowing for easy buying and selling.
Apart from the main goal of attaining returns and creating wealth, mutual funds can also serve as a means to fulfill other financial objectives, including saving for retirement, funding a child’s education, or purchasing a home.
Prior to selecting from the extensive range of mutual funds, it’s essential to examine their historical earnings. While future returns may not replicate past performance precisely, it remains valuable to assess how well the fund has maintained stability in the face of stock market fluctuations.
Mutual fund returns provide vital insights into the growth or decline of your investment over time, and they can be calculated through different methods. One common way of judging the quality of a fund is by looking at its Compounded Annual Growth Rate (CAGR).
The CAGR figure reveals the extent to which your investment has expanded during a specified time frame. When assessing a lump-sum investment with a
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