Last two trading session in the Indian stock exchange brought back smile on many investors face. The market is turning Green and most of stocks made some slight improvement. Even my portfolio showing in Green in days P&L. Many a times we witnessed that, after a bull run, markets often correct themselves, and it can feel like the returns that were accumulated now vanished. However it is not as such, if we consider CAGR, then we remain in profit in the long term.
Compound Annual Growth Rate (CAGR) is important during market corrections because it helps investors understand an investment's long-term growth potential and performance. CAGR is a reliable metric that smooths out short-term variations in growth, which can help investors make informed decisions.
Suppose,
You invested Rs. 15 lakh in March 2021. By February 2024, it had grown to Rs. 60 lakh.
But in the last 1 year, from March 2024 to January 2025, the market corrected, and the value dropped to Rs. 45 lakh.
Here’s the interesting part, Even with the drop in the last year, your average return over the past 4 years still comes out to 30% CAGR, which is still better than many other investments. Long-term growth, measured by CAGR, shows that steady growth over time can still lead to impressive returns.
Stock market returns can be solid even when there are quite periods. Patience is the key, and consistency pays off. Rather than getting into panic mode stay calm and stay invested.
In good faith - Peace!
