CAGR: separate compound growth from the path of losses

CAGR is the annual compound rate connecting a beginning value to an ending value over a stated number of years. It does not mean every actual year earned that rate.

Compute (ending value / beginning value)^(1 / years) − 1. The simple endpoint formula assumes external deposits and withdrawals do not distort the values.

A fictional portfolio grows from 1,000,000 yen to 1,331,000 yen in exactly three years, with no external cash flows. Its CAGR is 10%, because 1.1 cubed equals 1.331.

Its cumulative return is 33.1%. Dividing that by three gives about 11.03%, which is not the compound annual rate.

Two paths with the same positive endpoints and duration have the same CAGR even if one experiences a severe intermediate decline. Inspect drawdown and variability separately.

Fictional annual returns of +50% and −20% multiply to 1.2. The two-year CAGR is about 9.54%, while the arithmetic mean is 15%.

For fractional years, state the date and year-count convention. Annualizing a short observation period can magnify small changes without creating long-term evidence.

External flows require adjusted return or unit-value series, or a different money-weighted measure. Zero or negative starting values fall outside this ordinary positive-value formula.

KabuForge’s public course explains holdings, cash, costs and portfolio paths. Confirm the value basis and endpoints rather than assuming this article establishes a particular GUI calculation.

Read maximum drawdown, price and total return and transaction costs.

Concept references: GIPS standards on performance presentation and external flows. Additional reference: official power-operation documentation, distinct from financial standards. Software workflow and limitations: KabuForge public GUI research course. Reviewed October 6, 2026. The fictional examples are teaching calculations, not course execution results.

The public course is research-only and does not certify historical information availability. A concept explanation does not establish that every method is implemented in the software. This article recommends no securities, trades or settings. Read the disclaimer.

Explore the risk and return learning path

• Volatility: align return frequency and standard-deviation conventions
• Sortino ratio: define the target and downside denominator
• What is maximum drawdown? Measuring the fall from a portfolio peak