A 60% gain over 5 years is not 12% a year – it is about 9.86% compounded. Annualized return is the standard way to compare investments held for different lengths of time.
How to use the Annualized Return Calculator
- Calculate from
- Total return
- Initial value
- Final value
- Holding period
Results update as you type, and every field accepts the units shown in its menu.
How it works
Choose whether you know the total return or the starting and ending values, and enter the holding period in years (decimals allowed).
Tips
- Use the nominal annual rate and pick the compounding frequency your bank or broker states.
- Small differences in return or fees compound into large differences over decades.
- Run the calculation with a cautious, a central and an optimistic return to see the range of outcomes.
- Past returns do not guarantee future returns – nothing here is investment advice.
Common mistakes to avoid
- Comparing an APR with an APY or effective rate.
- Ignoring inflation, taxes and fees when judging a real return.
- Entering a percentage as a decimal (5 instead of 0.05 is correct here).
Inputs explained
| Field | What to enter |
|---|---|
| Calculate from | Choose one: Total return (%), Beginning and ending values |
| Total return | In % |
| Initial value | Amount in your currency |
| Final value | Amount in your currency |
| Holding period | Units: years, months |
What each result means
- Annualized return = ((1 + [Total return]÷100)^(1÷[Holding period]) – 1)×100
- Monthly compounded rate = ((1 + [Total return]÷100)^(1÷(12×[Holding period])) – 1)×100
- Quarterly compounded rate = ((1 + [Total return]÷100)^(1÷(4×[Holding period])) – 1)×100
Example values
How the main result changes when Total return changes and everything else stays at the example values above:
| Total return (%) | Annualized return (%) |
|---|---|
| 30 | 9.86 |
| 45 | 9.86 |
| 60 | 9.86 |
| 75 | 9.86 |
| 90 | 9.86 |
| 120 | 9.86 |
Formula
Annualized return = (1 + total return)^(1 ÷ years) − 1= (ending value ÷ starting value)^(1 ÷ years) − 1Worked example
Inputs — Calculate from: Beginning and ending values; Total return: 60 %; Initial value: $10,000; Final value: $16,000; Holding period: 5 years.
Results — Total return = 60 %; Annualized return = 9.86 %; Monthly compounded rate = 0.786 %; Quarterly compounded rate = 2.378 %.
Frequently asked questions
What is the difference between total and annualized return?
Total return is the whole gain; annualized return is the equivalent yearly compound rate.
Is annualized return the same as CAGR?
Yes, for an investment without additional deposits.
Can annualized return be negative?
Yes, if the investment lost value.
What formula does the Annualized Return Calculator use?
Annualized return = (1 + total return)^(1 ÷ years) − 1.