The Compound Annual Growth Rate (CAGR) is a measure that describes the growth of an investment over a period of time, assuming that profits are reinvested at the end of each period. It is expressed as a percentage and provides a constant growth rate that, if applied each year, would result in the final value of the investment.
The formula to calculate the CAGR is:
CAGR formula
Where:
Final value: the value of the investment at the end of the period.
Initial value: the value of the investment at the beginning of the period.
n: the number of years in which the investment has been made.
The CAGR is useful because it allows you to compare the growth of different investments or assets over time, eliminating the volatility that can occur in shorter periods.
CAGR over time
If we see the image, we could buy Bitcoin every September and we would have returns greater than standard and poors (market), returns greater than inflation (USD terms).
You could have interesting returns if we use dollar cost average.
