CAGR (Compound Annual Growth Rate) measures the smoothed annual growth rate of an investment over a period, as if it grew at a steady rate each year. It is the standard metric for comparing investment performance over different time periods.
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Pro Tip
CAGR is a rate, not a guarantee. A 10% CAGR means +50% one year, −40% the next is possible. Always examine volatility alongside CAGR when making investment decisions.
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Did You Know?
Berkshire Hathaway's stock has achieved a CAGR of about 20% since Warren Buffett took over in 1965 — turning $1 into over $40,000 in 60 years. The S&P 500 returned about $240 over the same period.
References
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