New Delhi, July 27 -- Two investments can show the same total percentage change and still tell different stories. One may have taken three years to reach that point, while another may have taken ten. This is where the distinction between absolute return and compound annual growth rate, or CAGR, becomes useful.

Both measures describe investment performance, but they answer different questions. Understanding the distinction can make it easier to read investment reports, compare periods and interpret performance figures for products such as mutual funds.

Absolute return measures the total percentage change between an investment's initial value and final value. Its formula does not account for the time between those two values.

The formula...