The compound annual growth rate (CAGR) is the annualized growth rate of an investment over a specified period. It is also known as a smoothed rate of return because it assumes the investment had grown at a steady rate on an annually compounded basis. The CAGR represents the rate of return required for an investment to grow from its beginning to ending value.
It is equal to the ending value divided by the beginning value and raised to 1 divided by the number of periods, minus one. CAGR remains unchanged by deviations in the returns within the investment horizon. That’s why professionals find it useful for comparing the performance of investments over a similar horizon.
This open-access Excel template is a useful tool for bankers, investment professionals, corporate finance practitioners, portfolio managers, and anyone working with spreadsheet software.
Compound Annual Growth Rate (CAGR) is among the topics included in the Portfolio Management module of the CFA Level 1 Curriculum. Gain valuable insights into the subject with our Portfolio Management course.
You can also explore other related templates such as—Portfolio Return, Holding Period Return, and Portfolio Risk.
