Average Annual Growth Rate - AAGR

AAA

DEFINITION of 'Average Annual Growth Rate - AAGR'

The average increase in the value of an individual investment or portfolio over the period of a year. It is calculated by taking the arithmetic mean of the growth rate over two annual periods. The average annual growth rate can be calculated for any investment, but will not include any measure of the investment's overall risk, as measured by its price volatility.

INVESTOPEDIA EXPLAINS 'Average Annual Growth Rate - AAGR'

For example, if your portfolio grows 10% one year and 20% the next, your AAGR would be 15%. To this end, fluctuations in the portfolio's rate of return between the beginning of the first year and the end of the year are not included in the calculations, which may lead to some measurement error.

To reduce any possible measurement error, an analyst can simply take the average price at the beginning and end of the two measurement periods, and use those average prices to determine each year's return, and then the AAGR.

RELATED TERMS
  1. Compound Annual Growth Rate - CAGR

    The year-over-year growth rate of an investment over a specified ...
  2. Compound Net Annual Rate - CNAR

    The return on an investment after taking tax implications into ...
  3. Portfolio

    A grouping of financial assets such as stocks, bonds and cash ...
  4. Risk

    The chance that an investment's actual return will be different ...
  5. Sustainable Growth Rate - SGR

    The maximum growth rate that a firm can sustain without having ...
  6. Arithmetic Mean

    A mathematical representation of the typical value of a series ...
Related Articles
  1. Investing

    When computing the PEG ratio for a stock, how is a company's earnings growth rate determined?

    Remember that the price/earnings to growth ratio (PEG ratio) is simply a given stock's price/earnings ratio (P/E ratio) divided by its percentage growth rate. The resulting number expresses how ...
  2. Markets

    The Uses And Limits Of Volatility

    Check out how the assumptions of theoretical risk models compare to actual market performance.
  3. Forex Education

    Compound Annual Growth Rate: What You Should Know

    The CAGR is a good and valuable tool to evaluate investment options, but it does not tell the whole story.
  4. Economics

    Selecting A Second-Tier Company

    Find out why an industry's "little guys" can be big winners.
  5. Delivery duty paid (DDP) is a shipping term.
    Investing

    What does DDP Mean?

    Delivery duty paid (DDP) is a shipping term specifying that the seller is responsible for all costs associated with delivery of the goods to the buyer. It is usually used when goods are exported ...
  6. Fundamental Analysis

    What is a good interest coverage ratio?

    Learn the importance of the interest coverage ratio, one of the primary debt ratios analysts use to evaluate a company's financial health.
  7. Fundamental Analysis

    What is a bad interest coverage ratio?

    Understand how interest coverage ratio is calculated and what it signifies, and learn what market analysts consider to be an unacceptably low coverage ratio.
  8. Active Trading Fundamentals

    What is liquidity risk?

    Learn how to distinguish between the two broad types of financial liquidity risk: funding liquidity risk and market liquidity risk.
  9. Technical Indicators

    What is a good gearing ratio?

    Understand the meaning of the gearing ratio, how it is calculated, the definition of high and low gearing, and how they reflect relative financial stability.
  10. Investing Basics

    What is considered to be a bad gearing ratio?

    Understand the basics of gearing, including the net gearing ratio, what constitutes a bad gearing ratio and how this figure reflects financial stability.

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center