CAGR (Compound Annual Growth Rate) is the most accurate way to measure your trading or investment performance over time. It answers the question: “What steady annual return would produce the same final result?”
Why CAGR Matters
Simple percentage returns can be misleading:
- Year 1: +50% ($10,000 to $15,000)
- Year 2: -30% ($15,000 to $10,500)
Average annual return: +10%. But CAGR is only 2.47% — much closer to reality.
CAGR accounts for compounding and gives you a single, honest number for comparing performance across different time periods and investments.
CAGR Benchmarks
| Performance Level | CAGR Range | Context |
|---|---|---|
| Below average | Under 7% | Underperforming index funds |
| Market average | 8-10% | S&P 500 historical average |
| Good | 10-20% | Active trader with edge |
| Excellent | 20-30% | Professional-level returns |
| Elite | 30%+ | Top hedge fund territory |
Using CAGR to Evaluate Your Trading
CAGR is most useful when:
- Comparing strategies across different time periods
- Benchmarking against buy-and-hold index returns
- Setting realistic goals for future performance
- Evaluating whether active trading adds value over passive investing
The Power of Compounding
A 20% CAGR doubles your money every 3.8 years. Over 10 years, it turns $10,000 into $61,917. This is why consistent, moderate returns dramatically outperform volatile, inconsistent ones.
How JournalPlus Helps
JournalPlus calculates your CAGR automatically from your actual trade history. It shows CAGR by strategy, by market, and by time period — so you know exactly which parts of your trading generate the strongest compounded returns.
