What does CAGR mean?

It represents the consistent rate at which an investment would have grown had the investment compounded at the same rate each year. CAGR is a geometric average and provides a more accurate measure of investment than a simple arithmetic mean.

What is a growth rate (CAGR)?

A CAGR is a way to measure an investment's average annual growth rate over a certain period, typically longer than one year. You can use CAGR to compare the historical performances of investments or predict their future expected returns or gains.

What is the difference between CAGR and arithmetic mean?

An average annual return (or arithmetic mean) ignores the effects of compounding and can overestimate growth. CAGR, on the other hand, represents a consistent rate at which the investment would have grown. CAGR will always be equal to or less than the arithmetic mean. Are CAGR and IRR the Same?

What is the difference between CAGR and IRR?

While CAGR is typically used as a tool for helping assess the past performance of an investment, or determining the interest rate an investment would require to reach an end value over a specific period of time, IRR is typically used for a company’s internal planning future growth and expansion. What is compound interest?