CAGR

What is CAGR? — Definition

CAGR (Compound Annual Growth Rate) represents the rate at which an investment would have grown if it grew at a perfectly steady rate each year. It smooths out the volatility of year-to-year returns into a single comparable number. The formula is: (Ending Value / Beginning Value)^(1/Years) - 1.

CAGR is one of the most useful metrics for comparing investments over different time periods. A fund that gained 100% one year and lost 50% the next has a 0% CAGR — it broke even. This illustrates why high CAGR over many years is much harder to achieve than it looks.

Example

Warren Buffett's Berkshire Hathaway achieved a CAGR of approximately 19.8% from 1965 to 2023 — nearly double the S&P 500's 10.2% CAGR over the same period. Due to compounding, that difference turned $1,000 into roughly $40 million at Buffett's rate versus $340,000 at the market rate.

BMInsider's Smart Money Tracker displays historical CAGR for tracked portfolios, helping you see which legendary investors have truly compounded capital over decades.