Is there a term that better describes a compound annual growth rate (CAGR) when it is negative?
"Not sure why CAGR is a problem for both directions. I used to be a physicist, and, when I taught classes in graduate school, students always wanted to use the terms ""accelerate"" and ""decelerate"" to describe ""speeding up"" and ""slowing down"". But acceleration is just a vector with magnitude and direction. There's nothing special about slowing down that it needs a special name. It's just acceleration in a direction opposite to the direction of motion. I think the same thing applies here. There's nothing special about negative growth rates that they need a special name. Just stick a minus sign in front of the number and you convey the required information." "My experience is in economics, so it may differ from an accounting or personal finance perspective somewhat; that being said, I find it perfectly acceptable to use a term like CAGR when the rate is positive or negative. Economists talk about negative growth rates all the time, and it's universally assumed that growth rates can be positive or negative.1 Ideally, the actual magnitude and sign of the value should be specified by the value itself. The term, whether it's ""growth rate"", some modified version of it like CAGR, or any label in a table or on a graph, should describe the calculation or source used obtain the value. I shouldn't need the name to indicate the sign of the number if the number is present; the name is only there to help me understand the value. Unfortunately, I don't know of any specific term that represents the geometric averaging nature of CAGR and also eliminates the minor potential for semantic confusion. However, I think the minor problem of semantics needs to be balanced against the tradeoff of using a different term that isn't as common, if one were to exist. CAGR is a standard, well-known term that a) allows someone who is familiar with the term to instantly understand the procedure you're using, and b) allow someone who isn't familiar with it to quickly search and find an explanation, since searching for CAGR will numerous simple explanations of how it's calculated. 1. This is different from the concept of economic growth, which is usually assumed to be positive in informal discussions. In economic modeling, many of the first steps in creating a model are symbolic anyway, so ""growth rate,"", ""change in output"", and ""economic growth"" are used interchangeably to describe changes in GDP because the values either aren't known, irrelevant until later in the project, or pulled from data that describes it using one or several of the previously stated terms." Same question had popped up in our office,and we got an answer from one of the senior colleague. He said that we can call it CARC (Compounded Annual Rate of Change).
If your question is truly just  What is good growth? Is there a target return that's accepted as good?   I assumed 8% (plus transaction fees). Then I'd have to point out that the S&P has offered a CAGR of 9.77% since 1900. You can buy an S&P ETF for .05%/yr expense. If your goal is to lag the S&P by 1.7%/yr over the long term, you can use a 85/15 mix of S&P and cash, sleep well at night, and avoid wasting any time picking stocks. if you bought gold in late '79, it would have taken 30 years to break even. Of all this time it was two brief periods the returns were great, but long term, not so much. Look at the ETF GLD if you wish to buy gold, and avoid most of the buy/sell spread issues.  Edit - I suggest looking at Compound Annual Growth Rate and decide whether long term gold actually makes sense for you as an investor. It's sold with the same enthusiasm as snake oil was in the 1800's, and the suggestion that it's a storehouse of value seems nonsensical to me. There is no generic formula as such, but you can work it out using all known incomes and expenses and by making some educated assuption. You should generaly know your buying costs, which include the purchase price, legal fees, taxes (in Australia we have Stamp Duty, which is a large state based tax when you purchase a property). Other things to consider include estimates for any repairs and/or renovations. Also, you should look at the long term growth in your area and use this as an estimate of your potential growth over the period you wish to hold the property, and estimate the agent fees if you were to sell, and the depreciation on the building. These things, including the agent fees when selling and building depreciation, will all be added or deducted to your cost base to determine the amount of capital gain when and if you sell the property. You then need to multiply this gain by the capital gains tax rate to determine the capital gains tax you may have to pay. From all the items above you will be able to estimate the net capital gain (after all taxes) you could expect to make on the property over the period you are looking to hold it for. In regards to holding and renting the property, things you will need to consider include the rent, the long term growth of rent in your area, and all the expenses including, loan fees and interest, insurance, rates, land tax, and an estimate of the annual maintenance cost per year. Also, you would need to consider any depreciation deductions you can claim. Other things you will need to consider, is the change in these values as time goes by, and provide an estimate for these in your calculations. Any increase in the value of land will increase the amount of rates and the land tax you pay, and generally your insurance and maintenance costs will increase with time. However, your interest and mortgage repayments will reduce over time. Will your rent increases cover your increases in the expenses. From all the items above you should be able to work out an estimate of your net rental gain or loss for each year. Again do this for the number of years you are looking to hold the property for and then sum up the total to give a net profit or loss. If there is a net loss from the income, then you need to consider if the net capital gain will cover these losses and still give you a reasonable return over the period you will own the property. Below is a sample calculation showing most of the variables I have discussed. "Do you recall where you read that 25% is considered very good? I graduated college in 1984 so that's when my own 'investing life' really began. Of the 29 years, 9 of them showed 25% to be not quite so good.  2013     32.42, 2009     27.11,  2003     28.72,  1998     28.73,  1997     33.67,  1995     38.02,  1991     30.95,  1989     32.00,  1985     32.24.  Of course this is only in hindsight, and the returns I list are for the S&P index. Even with these great 9 years, the CAGR (compound annual growth) of the S&P from 1985 till the end of 2013 was 11.32%  Most managed funds (i.e. mutual funds) do not match the S&P over time. Much has been written on how an individual investor's best approach is to simply find the lowest cost index and use a mix with bonds (government) to match their risk tolerance.  ""my long term return is about S&P less .05%"" sounds like I'm announcing that I'm doing worse than average. Yes, and proud of it. Most investors (85-95% depending on survey) lag by far more than this, many percent in fact)" GDP growth is one of several components of nominal equity returns; the (probably not comprehensive) list includes:  Real GDP/earnings growth  Inflation  Dividend payouts and share buybacks  Multiple expansion (the market willing to pay more per dollar of earnings)  Changes in interest rate expectations  As other comments mention you could also see larger companies tending to deliver higher returns as for any number of reasons related to M&amp;A, expansion into foreign markets, etc. "An answer can be found in my book, ""A Modern Approach to Graham and Dodd Investing,"" p. 89 http://www.amazon.com/Modern-Approach-Graham-Investing-Finance/dp/0471584150/ref=sr_1_1?s=books&ie=UTF8&qid=1321628992&sr=1-1 ""If a company has no sustained cash flow over time, it has no value...If a company has positive cash flow but economic earnings are zero or less, it has a value less than book value and is a wasting asset. There is enough cash to pay interim dividends, bu the net present value of the dividend stream is less than book value."" A company with a stock trading below book value is believed to be ""impaired,"" perhaps because assets are overstated. Depending on the situation, it may or may not be a bankruptcy candidate." There is another reason why an investor might buy negative yielding bonds: if the investor expects that bond yields will go even further negative, then they are also expecting the price of the bond to go up. They can resell the bond later at a profit. As an example, they may expect an increase in central bank bond purchases to drive yields lower and prices higher. "China's regulators, it seems, are on the attack. Guo Shuqing, chairman of the China Banking Regulatory Commission, announced recently that he'd resign if he wasn't able to discipline the banking system. Under his leadership, the CBRC is stepping up scrutiny of the role of trust companies and other financial institutions in helping China's banks circumvent lending restrictions.  The People's Bank of China has also been on the offensive. It has recently raised the cost of liquidity, attacked riskier funding structures among smaller banks, and discontinued a program that effectively monetized one-fifth of last year's increase in lending.  Are the regulators finally getting serious about reining in credit creation? The answer is an easy one: Yes if they're willing to allow economic growth to slow substantially, probably to 3 percent or less, and no if they aren't.    inRead invented by Teads  This is because there's a big difference between China's sustainable growth rate, based on rising demand driven by household consumption and productive investment, and its actual GDP growth rate, which is boosted by massive lending to fund investment projects that are driven by the need to generate economic activity and employment.  Economists find it very difficult to formally acknowledge the difference between the two rates, and many don't even seem to recognize that it exists. Yet this only shows how confused economists are about gross domestic product more generally. The confusion arises because a country's GDP is not a measure of the value of goods and services it creates but rather a measure of economic activity. In a market economy, investment must create enough additional productive capacity to justify the expenditure. If it doesn't, it must be written down to its true economic value. This is why GDP is a reasonable proxy in a market economy for the value of goods and services produced.  But in a command economy, investment can be driven by factors other than the need to increase productivity, such as boosting employment or local tax revenue. What's more, loss-making investments can be carried for decades before they're amortized, and insolvency can be ignored. This means that GDP growth can overstate value creation for decades.  That's what has happened in China. In the first quarter of 2017, China added debt equal to more than 40 percentage points of GDP -- an amount that has been growing year after year. In 2011, the World Economic Forum predicted that China's debt would increase by a worrying $20 trillion by 2020. By 2016, it had already increased by $22 trillion, according to the most conservative estimates, and at current rates it will increase by as much as $50 trillion by 2020. These numbers probably understate the reality.  If all this debt hasn't boosted China's GDP growth to substantially more than its potential growth rate, then what was the point? And why has it proven so difficult for the government to rein it in? It has promised to do so since 2012, yet credit growth has only accelerated, reaching some of the highest levels ever seen for a developing country.  The answer is that credit creation had to accelerate to boost GDP growth above the growth rate of productive capacity. Much, if not most, of China's 6.5 percent GDP growth is simply an artificial boost in economic activity with no commensurate increase in the capacity to create goods and services. It must be fully reversed once credit stops growing. To make matters worse, if high debt levels generate financial distress costs for the economy -- as already seems to be happening -- the amount that must be reversed will substantially exceed the original boost.  Once credit is under control, China will have lower but healthier GDP growth rates. If the economy rebalances, most Chinese might not even notice: It would require that household income -- which has grown much more slowly than GDP for nearly three decades -- now grow faster, so that the sharp slowdown in economic growth won't be matched by an equivalent slowdown in wage growth.  Clear thinking from leading voices in business, economics, politics, foreign affairs, culture, and more. Share the View  Enter your email  Sign Up But to manage this rebalancing requires substantial transfers of wealth from local governments to ordinary households to boost consumption. This is why China hasn't been able to control credit growth in the past. The central government has had to fight off provincial ""vested interests,"" who oppose any substantial transfer of wealth. Without these transfers, slower GDP growth would mean higher unemployment.  Whether regulators can succeed in reining in credit creation this time is ultimately a political question, and depends on the central government's ability to force through necessary reforms. Until then, as long as China has the debt capacity, GDP growth rates will remain high. But to see that as healthy is to miss the point completely."