Compounded Annual Growth Rate (CAGR)
The Compound Annual Growth Rate (CAGR) indicates the average annual return an investment generates over a period (e.g., 5+ years), assuming profits are reinvested. It smooths out performance to show consistent yearly growth. The formula is: CAGR = [(Ending Value / Beginning Value)^(1/N)] - 1, where N is the number of years. For example, if an investment grows from 1,000 to 2,000 in 5 years, CAGR = [(2000/1000)^(1/5)] - 1 = 14.87%. It’s a key metric for evaluating long-term investment performance.
Related Terms
Interest Rate Futures
Interest rate futures are derivative contracts based on interest-bearing instruments, such as bonds or loans....
Bottom Up Investing
Bottom-up investing is a stock selection approach that prioritizes the detailed analysis of individual companies...
Delivery Trading
Delivery trading involves buying/selling a security and settling it by taking/giving delivery. Unlike intraday trading,...
Abridged Prospectus
An abridged prospectus is a shortened version of a company's full prospectus. According to SEBI...
MACD
MACD (Moving Average Convergence Divergence) is a popular technical indicator used to spot changes in...
Limit Order
A limit order is an instruction to buy or sell a security at a specific...
