CAGR vs Absolute Returns: Key Differences Explained

Imagine you have two investments.

Both grow by the same total amount, but one took three years and the other took ten.

Absolute return tells you the total growth over the entire period, while CAGR tells you the average annual growth.

Absolute return is simple and shows the overall change, but it doesn't consider how long it took.

CAGR, on the other hand, smooths out the growth over the years, making it easier to compare different investments.

Neither measure tells you about the ups and downs along the way or predicts future returns.