Compound annual growth rate(CAGR)
CAGR is the steady yearly rate at which an investment would have grown to its final value, which makes multi-year returns comparable on an annual basis.
The compound annual growth rate, or CAGR, expresses a multi-year result as a single annual rate. It answers a simple question: if the investment had grown at one constant rate every year, what rate would turn the starting value into the ending value over the period? By smoothing the bumps into one number, it makes very different track records comparable on the same yearly basis.
CAGR is useful precisely because raw cumulative returns are hard to judge. A large total return over many years and a smaller one over a short period can look similar until you annualise them. At the same time, CAGR has a blind spot: it describes the destination, not the journey. Two strategies with the same CAGR can have wildly different drawdowns along the way, which is why an annual growth rate should always be read next to the risk that produced it.
This is how Crypto Wealth presents it. The backtest reports its annualised return alongside maximum drawdown and profit factor, so the yearly growth rate is never shown in isolation. A growth figure only means something when you can also see how much pain it took to earn it.
