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.

The CAGR Formula #

\text{CAGR} = \left(\frac{\text{Ending Value}}{\text{Beginning Value}}\right)^{\frac{1}{n}} - 1

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

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.,

<span class="katex-error" title="ParseError: KaTeX parse error: Can't use function ' &#x27; in math mode at position 7: 10,000 ̲). Step 3:\dots" style="color:#cc0000">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

Worked Example: 5-Year Tech Stock Performance #

Beginning Investment: $<span class="katex-error" title="ParseError: KaTeX parse error: Can't use function ' ' in math mode at position 7: 10,000 ̲$
**Ending Por…" style="color:#cc0000">10,000$
Ending Portfolio Value:

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

Absolute Return vs. CAGR #

Metric	Absolute Return	CAGR
Considers Time Horizon	No	Yes
Formula	$(\text{Ending} - \text{Start}) / \text{Start} \times 100$	$(\text{Ending}/\text{Start})^{1/n} - 1$
Best Used For	Short-term trades ( $< 1$ year)	Long-term asset allocation ( $> 1$ year)

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How to Calculate CAGR: Complete Beginner’s Guide

How to Calculate CAGR: Complete Beginner’s Guide

The CAGR Formula #