CAGR- Compound annual growth rate is what it’s called.
What CAGR tells you is the growth rate per annum of any amount
It aids investors in determining how quickly or slowly an investment grows in comparison to other investments.
The returns you see in mutual funds (3-year, 5-year, etc.) are in CAGR.
CAGR Example
Assume you know the investment’s initial value and its final worth after five years.
The compound annual growth rate (CAGR) is the pace at which an investment grew per year (with compounded interest) over a five-year period.
This is the right approach to assess compound growth in investments or any other type of growth that is compounded.
You’ve probably heard individuals talk about their mutual fund returns in terms of xyz percent each year.
When most people talk about real estate, though, they speak about how long it took to double or triple their money.
Many investors believe the growth rate is significantly faster as a result of this.
This isn’t always the case, however.
This is why, when comparing investments, you should constantly evaluate their CAGR rates.
CAGR Formula
CAGR is calculated using the following formula:
(Final value/initial value) raised to the power of (years) – 1.
Don’t worry if you’re puzzled by this. Simply look for CAGR calculator on the internet.
There are several CAGR calculators available online that you may use without understanding the formula.
How do you talk about real estate investment growth while you’re talking about it?
-The number of times it has grown (3 times, 4 times, etc.)
-As a percentage or compound annual growth rate (CAGR) (12 percent per annum for 5 years, 14 percent per annum for 2 years…)
