CAGR (Compound Annual Growth Rate)
The mean annual growth rate of an investment over a specified time period longer than one year, smoothing out intermittent volatility.
Systems Engineering Analogy
The constant theoretical velocity an investment would need to travel from its start value to its end value along a flat incline.
Mathematical SpecificationDeterministic
CAGR = (Ending Value / Beginning Value)^(1 / t) - 1Variables:
Beginning Value (P):Initial portfolio balance at start of observation period
Ending Value (A):Terminal portfolio valuation at end of period
t:Number of elapsed compounding years