CAGR (Compound Annual Growth Rate)

Return & Performance Metrics

The annualized rate of return that, if applied consistently each year, would produce the same total return over the investment period. For example, a strategy that turns $100 into $250 over 5 years has a CAGR of approximately 20.1%. CAGR is the most honest single number for comparing strategies across different time horizons. For reference, the S&P 500 has delivered approximately 10% CAGR over the long term, while a traditional 60/40 portfolio has delivered roughly 7–8%. Its limitation is that it conceals volatility entirely—two strategies with identical CAGR can have wildly different risk profiles.

Mentioned in this definition

Volatility

More in Return & Performance Metrics

Absolute Return StrategyAlphaCumulative ReturnExpected ValueOmega RatioWin Rate

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CAGR (Compound Annual Growth Rate) | Blackworks Capital