CAGR¶
Compound annual growth rate (CAGR) is the single constant annual rate at which an investment would have grown from its beginning value to its ending value over a specified period, assuming all gains are reinvested. It is the geometric growth rate implied by the start and end points alone, not the average of individual annual returns. A portfolio that grows from $10,000 to $25,000 over ten years has a CAGR of 9.6%, regardless of the path taken to get there.
HOW IT WORKS¶
CAGR is calculated with three inputs: beginning value, ending value, and elapsed time in years.
Formula: CAGR = (Ending Value / Beginning Value) ^ (1 / Years) − 1
For fractional holding periods, use the exact decimal year count as the denominator. Because the formula only references the start and end points, all interim volatility — drawdowns, rallies, flat stretches — is invisible to the result. This makes CAGR simple and comparable across assets, but it conveys nothing about risk or path. For any volatile return series, the arithmetic mean return will always exceed CAGR; the gap between the two grows with volatility, a phenomenon known as volatility drag. When money is added or withdrawn mid-period, CAGR misstates actual personal return — use internal rate of return (IRR) or time-weighted return instead.
IN TAPEBOARD¶
Tapeboard displays CAGR as a headline performance metric on any multi-year backtest or portfolio summary panel. When reviewing a strategy's backtest results, CAGR appears alongside maximum drawdown and win rate so you can immediately assess return relative to risk — since CAGR alone does not distinguish a smooth 15% annual grind from a 15% result that passed through a 60% drawdown. The analytics panel also surfaces the arithmetic mean return next to CAGR, making the volatility drag gap visible at a glance. Use the date-range selector to stress-test how sensitive a strategy's CAGR is to the chosen start and end dates before drawing conclusions.