Stocks & Investing

CAGR (Compound Annual Growth Rate)

The smoothed yearly rate that gets you from a starting value to an ending value.

CAGR expresses a bumpy multi-year return as one clean annual percentage, which makes different investments easy to compare. It ignores the ups and downs along the way and just answers "what steady yearly rate would have produced this result?"

For example

Turning $10,000 into $20,000 over 10 years is a CAGR of about 7.2% a year, even if some years were up 30% and others down 15%.

Related terms

Compound InterestReturn on Investment (ROI)

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