What is CAGR?
The compound annual growth rate: the smoothed annual rate that would have produced the observed change over the period.
It is deliberately a smoothing. A fund that returned 60% then −20% has the same CAGR as one that returned 13.1% twice, and CAGR hides the difference, which makes it right for comparison and wrong for judging risk.
CAGR = (V_final / V_initial)^(1/t) − 1Not to be confused with Absolute return
Absolute return is the total change and flatters long holdings. CAGR annualises it, which is what makes two investments over different periods comparable.