I am a bit confused by the the two terms 'Annualized Return' and 'CAGR' (compounded annual growth rate). The definition for annulized return is here. The definiton for CAGR I have taken from here. My understanding was that they are both same, however, the formulaes dont look same, I am a bit confused. So here is the question:

Can someone kindly explain the difference between Annualized Return vs. CAGR

1 Answer 1


There is no difference between Annualized Return and CAGR.

Your first link states

Simple Return = (Current Price-Purchase Price) / Purchase Price
Annual Return = (Simple Return +1) ^ (1 / Years Held)-1

and the second link states

enter image description here

These two formulae are equivalent.

Simple Return +1 is the same as Ending Value / Beginning Value.

  • Ah, now I get it, (Current Price-Purchase Price) / Purchase Price +1 = (Current Price-Purchase Price + Purchase Price) / Purchase Price = Current Price/Purchase Price, the formulaes are indeed same, thaks a lot for clearing it up, appreciate it.
    – Ironluca
    Apr 3, 2017 at 9:16

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