Learn to calculate returns and make more informed decisions
If someone asks you to jump into a pool, the first thing that you will ask is the depth of the pool. Now, assume that one person tells you that it is not too deep while the other tells you that it’s 6 feet deep. Which response will you consider while making your decision to jump?
Most likely the latter, i.e., the pool is 6 feet deep. Similarly, when you are choosing an investment for your portfolio, which of the following responses would you prefer?
The investment will give good returns or the investment can potentially generate 6-8 percent returns. Again, as a rational individual, you will probably use the latter information. This brings us to the most important part of choosing an investment. Calculating the returns.
Now, here is where most investors start losing sleep. What does Compounded Annual Growth Rate (CAGR) mean? Is it the same thing as simple interest? What is the concept of compounding?
Due to all this confusion, you are not only unable to calculate returns but might also find it difficult to compare returns of various instruments. We can simplify this for you by sharing just the right amount of information on return calculations.
The main aim of saving money and making investments is to preserve and grow the invested amount. For this purpose, it is important to accurately calculate the returns on your mutual fund investments.