Write an article based on this "Learn the definition. Understand the meaning of mean growth rate. Understand the meaning of annual growth rate. Understand the meaning of compound interest."
The compound annual growth rate (CAGR) is the mean annual growth rate of an investment over a defined period of time. The defined period of time is typically more than one year. It can either be calculated with a mathematical formula or found using spreadsheet software, such as Microsoft Excel. You can also find CAGR calculators on the internet. The mean is the mathematical average of two or more numbers. The formula for CAGR calculates the average annual growth of an investment. For example, suppose you invested $10,000 in stocks in 2012, and the value grew to 14,000 in 2013, to $15,000 in 2014, and to $19,500 in 2015. The formula for the CAGR would calculate the average amount by which the stock's value grew each year. The CAGR represents how much an investment would have grown each year as if it had grown at a steady rate. However, investments don't grow at a steady rate. Rather, they experience peaks and valleys. The CAGR averages all of these changes in value. The growth rate is the amount by which an investment increased in value over a specific period of time. In this case, it refers to how much an investment has grown in a year. Calculations of historical growth rate are often used for estimating future growth. The CAGR does not measure what happened in one year. Rather, it refers to the average annual change in an investment over a period of several years. The term compound refers to the way that compounded interest investments grow exponentially. Investments generate earnings. These earnings are then reinvested and generate earnings of their own. As this process continues over time, investments can continue to grow, even if you don't add any money to them. In other words, compound interest differs from simple interest in that interest is earned both on the original investment and interest earned, rather than simply on the original investment.