What is Compound Annual Growth Rate (CAGR)?

Compound Annual Growth Rate (CAGR) is one of the most accurate ways to calculate the returns on investments that fluctuate in value over time. Unlike simple average growth rates, CAGR smooths out the volatility of interim market ups and downs to reveal the steady annual rate at which an investment would have grown if it compounded at a constant rate.

Why CAGR Matters for Investors:

• Apples-to-Apples Comparison: CAGR allows investors to fairly compare the historical performance of different asset classes, mutual funds, or business ventures with vastly different timelines.
• Exposes Intermittent Volatility: It cuts through interim market fluctuations to show true long-term wealth accumulation.