Compound Annual Growth Rate (CAGR) is the annualized geometric mean growth rate of an investment over a specific period of time longer than one year. It smooths out annual fluctuations and represents what an investment would yield if it grew at a steady constant rate compounded annually.

CAGR vs Absolute Return: While Absolute Return only measures total percentage gain regardless of how many years it took, CAGR factors in the time horizon to reveal the true compounding power and realistic yearly performance of mutual funds, stocks, real estate, and businesses.