Plain-English definitions, reviewed by an independent investor
CAGR (Compound Annual Growth Rate)
CAGR is the smooth yearly growth rate that would take an investment from its start value to its end value over a period.
CAGR is the smooth yearly growth rate that would take an investment from its start value to its end value over a period.
CAGR = (End Value ÷ Start Value)^(1 / Years) − 1
Why it matters
It removes the ups and downs so you can compare growth across investments on equal terms.
Common confusion
CAGR hides volatility. Two investments with the same CAGR can feel very different along the way.
Frequently Asked Questions
Is CAGR the same as average return?
No. A simple average ignores compounding; CAGR reflects the steady compounded path.
Can CAGR be negative?
Yes, when the end value is below the start, meaning the investment shrank.