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Glossary
Markets & macro

CAGR

Compound annual growth rate

The smooth annual rate that would have produced your actual result.

CAGR strips out the year-to-year chaos and answers a single question: at what steady rate would this have grown to end up here? It is the only fair way to compare investments over different periods.

It hides the journey entirely. Two investments with identical CAGR can have wildly different drawdowns, and one of them may have been unendurable.

The formula
CAGR = (Ending ÷ Beginning)^(1/years) − 1
Figure

What a 2% fee costs over thirty years

Tracker, 0.07%Fund, 2%

Both lines earn the same 8%. One pays 0.07% a year, the other pays 2%. The gap is not a rounding error, it is most of the point of the exercise.

Why it matters

It is the standard language for comparing long-run performance.

The mistake everyone makes

Judging by CAGR alone. Always ask what the worst drawdown along the way was.

Related terms

Compound interest
Returns earning returns. The engine of every long-term outcome.
Drawdown
The fall from a peak to the following trough. The pain, measured.

See CAGR on a real company

SteadyShares pulls this straight from the filings for 1,100+ companies, alongside moat scores, DCF fair value and peer comparison. Free to look around.

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