📈 Linear Growth
A linear growth benchmark represents simple interest — the value increases by a fixed absolute amount each period.
💡 Financial Meaning
This models the scenario where you do not reinvest earnings (dividends, interest, coupons): cash payouts are received but kept aside, so only the original principal generates returns.
If instead you reinvest those earnings — either manually or automatically through accumulating instruments (e.g., accumulating ETFs, which reinvest dividends internally and benefit from tax deferral) — you should expect compound growth, where returns generate further returns.
In practice, the difference between linear and compound growth widens dramatically over long horizons. This is why the Linear benchmark appears as a straight line while the Compound benchmark curves upward exponentially.
Capital gains & losses
When selling an asset above its purchase price, the difference is a capital gain; below, a capital loss. Each jurisdiction has its own rules regarding tax rates, holding period thresholds, loss carry-forward duration, and matching methods (FIFO, LIFO, specific identification). For a theoretical overview, see Taxation & Tax Efficiency.
🔢 Mathematical Formula
where:
- \(y_0\) is the starting value (first data point of the chart),
- \(r\) is the annual growth rate (expressed as a decimal, e.g. 0.07 for 7%),
- \(t\) is time in years from the start.
This is equivalent to the simple interest formula \(A = P(1 + rt)\), where \(t\) is expressed in years using the applicable Day Count Convention.
⚙️ Parameters
| Parameter | Key | Default | Description |
|---|---|---|---|
| Annual Rate | annualRate |
5 | Growth rate in percent per year. |
| Offset | offset |
0 | Vertical shift as % of base value. |
🔍 Interpretation
The line is perfectly straight on a linear scale. Any point where the actual price is above the line means the asset has outperformed the target; any point below means underperformance. Because the growth is additive, the line curves downward on a logarithmic scale — making it easy to visually distinguish from compound growth.