How to Calculate ETF CAGR from Historical Prices
Calculate compound annual growth rate correctly from ETF start value, end value, and the exact elapsed time.
The CAGR formula
CAGR equals (ending value divided by beginning value) raised to the power of one divided by elapsed years, minus one. It converts a multi-year change into a constant annualized rate.
Use exact elapsed time
Trading windows rarely contain an exact whole number of years. Calculate elapsed years from the effective start and end dates rather than dividing observation count by 252. If dates fall on closed-market days, report the trading dates actually used.
Limitations
CAGR hides volatility and drawdowns. Two ETFs can have the same CAGR while exposing investors to very different paths. Display CAGR alongside total return, volatility, and maximum drawdown.
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