Compound Annual Growth Rate (CAGR)
The smoothed annual growth rate of an investment over time.
Definition
Compound Annual Growth Rate (CAGR) is the constant annual rate at which an investment would have grown if it compounded steadily over a period. It smooths out year-to-year volatility to give a single 'average' annual return.
Formula
CAGR = (Ending Value / Beginning Value)^(1 / years) − 1 Example
₹1,00,000 growing to ₹2,00,000 over 6 years has a CAGR of about 12.2% per year.
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