Smooths a bumpy path of yearly returns into the single steady rate that would have produced the same result. Useful for comparing two investments fairly, but it hides volatility entirely — two portfolios with the same CAGR can have had very different rides getting there.

🇵🇹 PPR and investment fund performance reports in Portugal commonly quote exactly this: an annualized return over 3, 5, or 10 years. Always compare the same period across products — a 3-year CAGR and a 10-year CAGR aren't directly comparable, even for the same fund.