Investing glossary
Annualized return (CAGR)
The annualized return (CAGR, compound annual growth rate) expresses the gain of a multi-year investment as if it had grown at a constant rate every year, so periods of different lengths can be compared.
It is not the simple average of each year's returns: it accounts for the effect of compound interest, so it tends to be somewhat lower than that simple average when good and bad years are mixed.
It is the standard way to compare the historical performance of funds, indices, or portfolios with different track-record lengths, and it is the one used in this site's rankings and in the "How much would you have?" simulator.