Concepts2 min read

Compound Annual Growth Rate (CAGR)

The rate at which an investment grows on average per year, accounting for compounding.

CAGR represents the mean annual growth rate of an investment over a multi-year period, assuming profits are reinvested (compounded) each year. It smooths out year-to-year volatility to give a single number representing the steady growth rate that would produce the same end result.

Formula: CAGR = (End Value / Start Value)^(1/years) − 1.

CAGR is the standard metric for comparing investment funds, ETFs, and other market-linked products in Egypt. Unlike simple APR, CAGR reflects the effect of compounding and is more accurate for multi-year comparisons.

Worked example

Suppose a fund grows from EGP 100 to EGP 150 over 3 years (illustrative numbers).

CAGR = (150 / 100)^(1/3) − 1
     = 1.5^(0.333) − 1
     ≈ 0.1447
     = 14.47% per year, compounded.

A simple-interest read of the same numbers (50% over 3 years) would say ~16.7% per year — overstating the steady growth rate. CAGR is the honest answer.

Numbers chosen for arithmetic clarity, not as a current quote.

Key facts

Accounts for compounding — more accurate than simple APR for multi-year returns
Standard metric for funds, ETFs, and market-linked products
Past CAGR does not guarantee future returns
Smooths out year-to-year volatility into a single average figure
Used to express fund performance on 1Y, 3Y, 5Y, and since-inception windows

In Egypt

Egyptian money market funds and investment funds publish their returns as CAGR over 1-year and 3-year windows. Sopdet uses CAGR for HISTORICAL_CAGR products (funds, ETFs) and simple APR for CONTRACTUAL products (CDs, T-bills, savings). Always check the time window before comparing CAGRs — a 5Y CAGR and a 1Y CAGR are not directly comparable.

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Key facts

Accounts for compounding — more accurate than simple APR for multi-year returns

Standard metric for funds, ETFs, and market-linked products

Past CAGR does not guarantee future returns

Smooths out year-to-year volatility into a single average figure

Used to express fund performance on 1Y, 3Y, 5Y, and since-inception windows

In Egypt