What is the full form of CAGR
CAGR: Compound Annual Growth Rate
CAGR stands for Compound Annual Growth Rate. It refers to the rate of return required for an investment to grow from its initial value to its ending value if the profits were reinvested at the end of each year of the investment's lifespan, i.e., when the investment has been compounding over the time period. So, it is a measure of growth over multiple time-periods that measures the total return on investment by calculating the return every year and compounding them. We can say that it is the annual growth rate of an investment over time when the effect of compounding taken into account. However, CAGR does not reflect investment risk.
The Formula and Calculation of CAGR:
CAGR = (EB/IB) 1/n - 1
EB = Ending Balance
To calculate the CAGR of an investment:
Benefits of CAGR: