What investing term means the annualized average growth rate of an investment over a period longer than one year?

Compound annual growth rate, or CAGR, means the annualized average growth rate of an investment over a period longer than one year.

CAGR uses the beginning value, ending value, and number of years to show the constant annual rate that would produce the same ending value if returns compounded. It is calculated as the ending value divided by the beginning value, raised to the reciprocal of the number of years, minus one.

CAGR smooths the path of returns. It does not say that the investment actually grew at that same rate every year, and it does not show interim volatility. For example, an investment may rise sharply one year and fall the next while still having a positive CAGR over the full period. CAGR is useful for comparing historical growth across investments with different time spans, but it excludes the detailed sequence of annual gains and losses.