CAGR vs Cumulative Return: The Difference, with an Example

What cumulative return tells you

Cumulative return compares the ending value with the starting value without converting the result into an annual rate. For example, 100,000 baht growing to 121,000 baht over two years is a cumulative gain of 21%, before considering fees or other cash flows.

This tells you the total change over the selected period. It does not mean each year grew at the same rate.

CAGR smooths compound growth into a yearly rate

The basic formula is: CAGR = (ending value ÷ starting value) raised to (1 ÷ number of years), minus 1. In the example, (121,000 ÷ 100,000) raised to 1/2, minus 1, is about 10% per year.

A 10% CAGR does not mean the investment actually returned 10% in each year. A 21% cumulative gain could result from an up year, a down year, or many different sequences of returns.

Cash flows change what the number represents

This simple formula works best when comparing a starting amount with an ending amount over a period. If money was added or withdrawn along the way, those two values alone may not reflect an investor’s actual experience. Check which method the chart uses and whether it includes individual cash flows.

Also check fees, taxes, and currency. NAV returns may include some costs but exclude others.

A checklist for reading a performance chart

1. Check the start and end dates.
2. Identify whether the figure is cumulative or annualized.
3. Confirm the currency and any hedge treatment.
4. Read which fees are included or excluded.
5. Compare only data calculated on a consistent basis.

Finnomena’s performance disclosure says historical returns do not guarantee future results. Its displayed NAV returns include management fees but exclude certain sales charges, such as front-end fees; read the chart notes each time.