CAGR
Compound Annual Growth Rate is the smoothed annualized return of an investment over a specific time period. It dampens the effect of volatility to show a steady growth rate.
XIRR
Extended Internal Rate of Return is a method used to calculate returns on investments where there are multiple transactions happening at different times. It is the standard for SIPs.
Real Rate of Return
The annual percentage return realized on an investment, adjusted for changes in prices due to inflation. Formula: ((1 + Nominal Rate) / (1 + Inflation Rate)) - 1.
Benchmark
A standard against which the performance of a security, mutual fund, or investment manager can be measured. Common benchmarks include the Nifty 50, S&P 500, or the rate of inflation.
Alpha
A measure of the active return on an investment, the performance of that investment compared with a suitable market index. Positive alpha means you beat the market; negative alpha means you lagged.
Drawdown
A measure of the decline from a historical peak in some variable (typically the cumulative profit or total open equity of an investment portfolio). It indicates risk.
Holding Period
The amount of time the investment is held by an investor, or the period between the purchase and sale of a security. Long holding periods generally benefit from compounding.
Absolute Return
The total return on an investment expressed as a percentage of the invested capital, without regard to the time it took to earn that return.