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CAGR, XIRR simplified
By Rainbow Coin  •  January 30, 2017
Inspired by SMOL's post, I decided to do some reading and a short post on these "cheem cheem" terms that previously I do not use. CAGR stands for Compound Annual Growth Rate. It is useful in measuring (in %) how much an investment has increased in value over a fixed period of time. Watch the illustration in this video here - http://www.investopedia.com/calculator/cagr.aspx  So if your investment grew from $1000 to $1500 over a period of 3 years, the CAGR is 14.5%. Which means the amount increased by 14.5% on its compounded value each year, as follow Year 1: $1000+14.5% Year 2: Year 1 compounded $$ + 14.5% Year 3: Year 2 compounded $$ + 14.5% = $1500 This is provided no fresh fund is injected into the investment (the investment compounds itself) over the three years. So if investment A returns 14.5% and investment B returns 10%, obviously investment A is doing better and probably worth investing more money in going forward......
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By Rainbow Coin
I began exploring the financial world in year 2010, hoping to get out of the rat race and be financially independent. 2010 was the aftermath period of the Lehman crisis when a pretty shaken up market was struggling to recover. On hindsight, that was the perfect time to catch multi-bagger stocks should I be a veteran or at least had some basic knowledge of picking up 'gems'. My learning curve was steep then, as I have absolutely no friends or relative who could shed some light on what's investing about.
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