Series 79: 3.5.6. Compound Annual Growth Rate

3.5.6. Compound Annual Growth Rate

The compound annual growth rate (CAGR) of an investment is the year-over-year growth rate of the investment if it is assumed that it grew at a steady rate over a particular period. Although the actual rate of return over whatever period of time you are examining may have been quite different from year to year, CAGR smooths it out to provide an average compound growth rate per year. CAGR can be used to measure (or compare) the return provided by a security, by an entire company, or by a division or business line.

The CAGR calculation is more complex than most of the metrics