CAGR (Compound Annual Growth Rate) measures the smoothed, constant annual growth rate that would take an investment from its starting value to its ending value over a given period, assuming profits compound each year. It ignores year-to-year volatility and shows the equivalent steady annual return.

Average annual return is a simple arithmetic mean of yearly returns and can be misleading when returns are volatile (e.g. +50% one year and -50% the next averages to 0%, but the investment actually lost money). CAGR accounts for compounding and reflects the real annualized growth rate over the full period.

For Indian equities, a CAGR above 15% is generally considered excellent, 10-15% is good and roughly in line with long-term index averages, while below 10% is moderate. Compare CAGR against relevant benchmarks like the Nifty 50 or Sensex over the same period for context.

Yes. If the ending value is lower than the starting value, CAGR will be negative, indicating the investment lost value on an annualized basis over the period, even though there may have been ups and downs along the way.