GLOSSARY TERM
CAGR (Annualized Return)
CAGR stands for Compound Annual Growth Rate. It shows the average yearly return of an investment over a period of time, as if it had grown at a steady rate every year.
What does this mean in practice?
In real life, investments do not grow evenly. One year may be positive, another negative. CAGR helps simplify this by turning uneven returns into one yearly average. It is useful when comparing investments or looking at long-term performance.
Example
If you invest €1,000 and it grows to €1,610 in 5 years, the CAGR is about 10%. That means the investment grew at an average annual rate of 10%, even if the actual yearly returns were different along the way.
Why it matters
CAGR gives a clearer picture of long-term growth than just looking at total return. It helps you compare investments more fairly and understand how money compounds over time.
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