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Investment Performance

Annualized Return Calculator

Convert a total return over any period into a comparable yearly rate.

Calculator inputs
%
yrs

Annualized return

7.71%

Compound Annual Return

Total return

45.00%

Key insight

Annualized Return
7.71%
Total return
45.00%
$10,000 becomes
$14,500
$14,500 025 Starting Value $10,000, Ending Value $14,500, Total Return 45.00%, Annualized Return 7.71%, Holding Period 5 yrsStarting Value: $10,000Ending Value: $14,500Total Return: 45.00%Annualized Return: 7.71%Holding Period: 5 yrsStarting Value $10,000, Ending Value $14,500, Total Return 45.00%, Annualized Return 7.71%, Holding Period 5 yrsStarting Value: $10,000Ending Value: $14,500Total Return: 45.00%Annualized Return: 7.71%Holding Period: 5 yrsStarting Value $10,000, Ending Value $14,500, Total Return 45.00%, Annualized Return 7.71%, Holding Period 5 yrsStarting Value: $10,000Ending Value: $14,500Total Return: 45.00%Annualized Return: 7.71%Holding Period: 5 yrsStarting Value $10,000, Ending Value $14,500, Total Return 45.00%, Annualized Return 7.71%, Holding Period 5 yrsStarting Value: $10,000Ending Value: $14,500Total Return: 45.00%Annualized Return: 7.71%Holding Period: 5 yrsStarting Value $10,000, Ending Value $14,500, Total Return 45.00%, Annualized Return 7.71%, Holding Period 5 yrsStarting Value: $10,000Ending Value: $14,500Total Return: 45.00%Annualized Return: 7.71%Holding Period: 5 yrsStarting Value $10,000, Ending Value $14,500, Total Return 45.00%, Annualized Return 7.71%, Holding Period 5 yrsStarting Value: $10,000Ending Value: $14,500Total Return: 45.00%Annualized Return: 7.71%Holding Period: 5 yrs

How it's calculated

Formula

Annualized Return = (1 + Total Return)^(1 ÷ Years) − 1

How it works

A cumulative return is spread evenly across each year by taking the t-th root. This puts investments of different lengths on the same per-year footing, so a 45% gain over 5 years can be compared with a 20% gain over 2.

Variables

Annualized Return
The equivalent yearly compound return that produces the same total return over the selected holding period.
Total Return
Cumulative return over the whole period (decimal form)
Years
Holding period in years

Worked example

Step 1 Convert the total return to decimal 45% = 0.45 Step 2 Add one 1 + 0.45 = 1.45 Step 3 Take the nth root 1.45^(1 ÷ 5) = 1.0771 Step 4 Subtract one 1.0771 − 1 = 0.0771 Step 5 Convert back to percentage 7.71% A 45% total return over 5 years is about 7.7% per year — the rate that, compounded annually, produces the same result.

Frequently asked questions

When should I use annualized return?

Whenever you compare investments held for different lengths of time, or want a per-year figure you can weigh against benchmarks and inflation.

Is this the same as CAGR?

Mathematically yes. CAGR starts from a beginning and ending value; this version starts from a total-return percentage. Both give the compound annual rate.

Why is the annualized rate lower than total ÷ years?

Because of compounding. Dividing the total by the number of years ignores that each year's return builds on the last, which overstates the yearly rate.

Can I annualize a return from a few months?

Yes — enter the period as a fraction of a year (e.g. 0.5 for six months). Just be cautious: annualizing short, volatile periods can exaggerate the rate.

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