Total return and annualised CAGR on an investment.
Annualised return (CAGR)
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Total return
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Total gain
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Tax on gain
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Worked example
Suppose AED 50,000 invested grew to AED 90,000 over 5 years. The total gain is AED 40,000, and the total return is 90,000 divided by 50,000 minus 1, which is 80% over the whole period. To annualise that into a CAGR, take the ratio 1.8 to the power of one fifth and subtract 1, which gives about 12.5% a year. That single rate, applied five times in a row, is what turns 50,000 into 90,000. In the UAE there is no individual capital gains tax, so the full AED 40,000 gain is yours and the tax line is AED 0.
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How it is calculated
Total return is simply the final value divided by the initial value, minus one, expressed as a percentage of the starting amount. The compound annual growth rate, or CAGR, converts that whole-period return into a steady yearly rate. It is the ratio of final to initial raised to the power of one divided by the number of years, minus one. CAGR smooths volatility into a single figure, so a holding that doubled then halved and a holding that crept up steadily can share the same CAGR if they end at the same value. It does not capture the path or the risk taken to get there. In the UAE there is no individual capital gains tax, so the entire gain is kept on disposal with no deduction, which is why the tax field shows zero.