Suppose you have an initial investment that grew one year 10% and second
year 20%. You figure that in average it grew 15%, right? Wrong!
This does not take into account the interest on each year that get added to the
overall investment. Generally you will find that taking into account those
accumulations the less fluctuatinf yearly interest rate is better
with the same average.
CAGR of the Stock Market
This calculator lets you find the annualized growth rate of the S&P 500 over
the date range you specify; you'll find that the CAGR is usually about a
percent less than the simple average.
(These returns are just capital gains, not dividends; if you owned an S&P
500 index fund with low fees you would have made more money than this.)