CAGR
Quick definition: CAGR, or compound annual growth rate, is the steady yearly rate at which an investment would have to grow to go from its starting to its ending value.
In plain English
Real returns jump around from year to year. CAGR smooths them into a single average yearly rate.
CAGR = (ending value ÷ starting value) ^ (1 ÷ years) − 1
Example
$10,000 grows to $16,000 in 5 years. The CAGR is about 9.9% a year.
Why it matters
It lets you compare investments held for different lengths of time on one scale. You can use it for portfolio value, revenue, or a dividend’s growth rate.
Common mistakes
- Treating it as the actual return every year. It hides the ups and downs.
- Comparing CAGRs over very different time periods.
Investment Disclaimer
All information and tools on this website are provided for informational
purposes only. The calculations, examples, and projections are simplified
estimates and may not reflect real-world investment results.
Nothing on this website should be interpreted as financial, investment,
tax, or legal advice. You are solely responsible for your investment
decisions and any outcomes resulting from them.
Past performance and projected returns do not guarantee future results.
Always conduct your own research and consult a qualified financial advisor
before making investment decisions.