What does CAGR stand for?

CAGR stands for Compound Annual Growth Rate. This term is widely used in finance and investing to describe the mean annual growth rate of an investment over a specified time period, assuming the investment has been compounding over that duration. By using CAGR, investors can understand how much an investment growth rate would be if it had grown at the same rate each year. This calculation simplifies comparisons between different investments or growth scenarios.

Understanding CAGR is crucial for evaluating performance and making informed investment decisions. It encapsulates the overall growth as a single percentage and is particularly useful when comparing the growth rates of various companies, funds, or portfolios over time, putting all of them on a level playing field in terms of growth assessment.