How to Calculate CAGR: Complete Beginner’s Guide

When evaluating stocks, mutual funds, revenue growth, or business metrics over multiple years, relying on a simple arithmetic average often yields misleading results. Compound Annual Growth Rate (CAGR) solves this problem by calculating the steady annual rate an investment would have grown if it compounded smoothly each year.

Calculate your investment's annualized return instantly with the Burnjet CAGR Calculator.

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The CAGR Formula #

Where:

• Beginning Value: Initial investment or base value at period $t_0$
• Ending Value: Final portfolio valuation at period $t_n$
• $n$: Total elapsed duration in years

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Step-by-Step: Using the Burnjet CAGR Calculator #

Step 1: Open the Tool #

Visit Burnjet CAGR Calculator.

Step 2: Enter Starting Capital #

Input your original purchase cost or baseline portfolio value (e.g., $10,000).

Step 3: Enter Ending Value #

Input the final liquid balance (e.g., $25,000).

Step 4: Enter Number of Years #

Enter the total elapsed investment horizon in years (e.g., 5 years).

Step 5: Read the Growth Breakdown #

The tool immediately computes:

• Compound Annual Growth Rate (CAGR %)
• Absolute Total Return (%)
• Total Profit Generated

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Worked Example: 5-Year Tech Stock Performance #

• Beginning Investment: $10,000
• Ending Portfolio Value: $24,883
• Time Period: 5 years

Step-by-step Math: #

1. Divide ending value by beginning value:
   $$rac{24,883}{10,000} = 2.4883$$
2. Take the reciprocal 5th root ($1/5 = 0.2$):
   $$(2.4883)^{0.2} = 1.20$$
3. Subtract 1 and convert to percentage:
   $$(1.20 - 1) imes 100 = 20.0$$

The CAGR is 20.0% per year, whereas the Absolute Total Return is 148.83%.

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Absolute Return vs. CAGR #

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Related Tools #

• Stock Return Calculator: Factor in brokerage fees and dividend distributions.
• SIP Calculator: Model ongoing recurring monthly investments.
• Rule of 72 Calculator: Estimate doubling intervals based on CAGR.