Compound Annual Growth Rate

A geometric average measure of the growth rate of an investment portfolio or individual security over multiple time periods. As investments can lose value as well grow, the compound annual growth rate smooths out the volatility within the returns over the length of time they are held for and gives a percentage gain or loss equivalent to if they grew or fell in value at a steady rate. This can give a better measure of returns over time than a simple average annual return which ignores the effects of compounding.

This definition is for general information purposes only