AAGR

AAGR stands for Average Annual Growth Rate. It is a financial metric used to determine the average yearly increase in an investment or financial metric over a specific period of time longer than one year. AAGR provides a smoothed-out representation of growth by averaging the growth rates from each year.

To calculate AAGR, you first determine the growth rate for each year within the specified period. This is typically done by comparing the value of the metric at the end of a year to its value at the beginning of that year. The formula for the annual growth rate is ((Ending Value - Beginning Value) / Beginning Value) * 100%. Once the individual annual growth rates are calculated for each year, they are summed up and then divided by the total number of years in the period.

For example, if an investment grew by 10% in year 1, 5% in year 2, and 15% in year 3, the AAGR would be (10% + 5% + 15%) / 3 = 10%. This indicates that, on average, the investment grew by 10% per year over the three-year period.

AAGR is a simpler metric than Compound Annual Growth Rate (CAGR). While AAGR provides a straightforward average, it does not account for the compounding effect of growth. CAGR, on the other hand, measures the average annual growth rate assuming profits are reinvested, offering a more accurate picture of investment performance over time, especially for longer periods. AAGR can be misleading if there are significant fluctuations in growth year-to-year.