What is the annual growth rate?
The annual growth level is a financial calculation that allows you to determine the average year between the annual growth rate of investment. The growth rate of composed is often used to ensure that the return on the investment follows a favorable trend. At the same time, a Cagr can be a means of identifying a declining trend that could cause the investor to sell the investment to the investment before the current value falls below the initial basic value or purchase price.
Detecting the growth rate is based on determining the number of years that will be used in the calculation. For example, if an investor wants to calculate the growth rate for five years, the basic value for the furthest year serves as what is called the initial value. The basic value for the last year considered as an end value. In order to start the process of calculating the growth rate of compound value. This percentage of the result is then taken into account by the NTH root, where n is considered to be the number of years involved in the calculation. By the final number bUde average or compound annual growth rate for all years involved in the period.
In general, a composite annual growth rate, which applies to the five -year period. This is considered to be adequate sampling that allows usual rise and falls on any given market. However, it should be understood that the annual growth rate is average and not the actual growth rate for every year considered. There could be a significant difference between the exact level of growth or a decline from one year to the next and calculated annual compound growth rate.
Nevertheless, the mixed annual growth rate is a quick and easy way to get a feeling for the overall growth pattern of the investment. Since the composite annual growth rate is more of a geometric average than the arithmetic average, it has the advantage that during the cited period it allows climb and decline. It is therefore possible for the investor to see the cumulative result of any actual growthu within the investment over time.