Average annual growth rate is a relatively simple way of describing a portfolio's growth over time. The calculation involves dividing the profit investments have shown by the number of years involved. It doesn't take into account fluctuations in growth over the years or the ways that complications, like compounding, have impacted the figures.
Stepping away from finance for a second, imagine an 18 year old with a 30 inch waist. Now imagine the same person, now 33, with a waist measurement of 45. The AAGR of the person's waistline is 1 inch per year. What the calculation doesn't know is that everything was fine until the divorce and the layoff, and that for the last years, it just seemed like no one cared except Krispy Kreme and McDonald's. (Don't worry; we're feeling much better now.)
Anyway, AAGR is something of a back-of-the-envelope measure. However, in the financial realm, it's popular in marketing materials for investment outlets, things like mutual funds and financial advisors.
Average Annual Growth Rate can be used to calculate the increase of value for an investment. It's done by finding the mean value in a series of growth measurements. So to calculate it, you would find the annual rate of return for the business, then compare that year to the one before it to find the percentage it changed (hopefully as an increase). You could do this as many times as you wished to determine if it's increasing or decreasing, and by what percentage, for any length of time.
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Finance: What is Hurdle Rate?62 Views
Finance allah shmoop shmoop what is ah hurdle rate Well
a hurdle rate refers to the investment return minimum that
an investment project requires for it to be worth taking
the risk and effort to do it in the first
place All right what does that really mean Well you're
the new ceo of baby's first chainsaw inc a project
manager present to you the opportunity to open a new
line of business called grand pas last chain saw going
into that business will cost you one hundred million box
of initial investment in large print labeling walker accessible attachments
jittery hand stabilizers and some extra denture cream You as
ceo are looking at eight other projects you can afford
to do on ly one and the best of the
eight other projects is a similar product called the unhinged
midlife crisis chainsaw which has been garnering a lot of
early interest That project has return rate of fourteen percent
so the project manager presenting grandpas last chainsaw now has
a hurdle rate that must be above the highest last
hurdle or fourteen percent fourteen percent annualized return got it
and that's as presented by the project manager pitching investment
in the mid life crisis model meaning they think it'll
return fourteen percent a year on the investment Got it
Whichever of those eight competitive project managers presents the most
believable projections for sales and profits that exceed the others
well they'll soon become king of the family chainsaw market
And the ones who don't well let's just say they 00:01:38.855 --> [endTime] use a few extra bodies over in product development
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