I recently started thinking about how to properly evaluate the performance of my investments.

Many people think it's enough to look at percentages, but it's not that simple.
That's why CAGR, or compound annual growth rate, is used.
It's a really useful thing that everyone involved in investing should know.

What’s interesting about CAGR?
Unlike a simple calculation of percentage gain, it takes the effect of compounding into account.
This means that your profit in one year becomes part of the capital in the next year.
So it’s not just adding up, but actually growing on itself.
When you look at it, CAGR gives you a very accurate picture of how your investment has behaved over time.

To calculate it, just remember a simple formula:
Take the ending value, divide it by the starting value,
raise it to the power of one divided by the number of years,
and then subtract one from that.
Multiply the result by 100, and you have the percentage.
It sounds complicated, but once you try it once, it’s actually a breeze.

Why should CAGR matter to you?
It’s not about giving you an exact return.
It’s more about showing the average annual rate at which your investment would grow if it increased steadily and profits were reinvested.
That’s really valuable information.
Thanks to that, you can better compare different investments and see which one was the most profitable during a certain period.

Since I started using CAGR, it’s helped me a lot with long-term planning.
It’s not just about numbers; it’s about understanding how your capital truly develops.
Now, when I look at my old investments, I see their actual performance much more clearly.
If you want to be serious about investing, you should know and be able to use CAGR.