CAGR, Compound Annual Growth Rate, is the mean annual growth rate of an investment over a specified period of time. Rather than a true return rate, it is a representative figure that describes the return rate in the case where an investment has grown at a steady rate over a period of time, which rarely happens in reality. To calculate the CAGR over a specific period of time, we divide the ending value of an investment by its original value at the beginning of that period. Then we take the Nth root of that figure and subtract 1 from the subsequent result, where N represents the period length in years.
