Annualized Return Calculator

Calculate total ROI, average ROI per period and CAGR with our Annualized Return Calculator. Get insights for informed investment decisions.

Result Total ROI on 0 Years: 0% Average ROI by Year 0% Average CAGR by Year 0%
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Annualized Return Formula

The annualized return, often used in finance, calculates the average rate of return over a period, typically expressed as a percentage. The formula for annualized return (AR) is:

AR = ((Ending Value / Beginning Value)^(1/n)) - 1

  • AR: Annualized Return
  • Ending Value: The value of the investment at the end of the period
  • Beginning Value: The initial value of the investment at the start of the period
  • n: Number of periods, typically years, but can be any interval (e.g., months, quarters)

Annualized Return from Daily Returns

Our calculator also provides the capability to calculate annualized returns from daily returns. Follow these steps:

  1. Input the daily returns of your investment into the calculator.
  2. Choose the appropriate time period (e.g., number of days) for which you have the daily returns. Instead of Years.
  3. The calculator will then process the daily returns and provide you with the annualized return.

This feature allows you to analyze the performance of your investment over a daily timeframe and determine the annualized return.

Annualized Return vs. CAGR (Compound Annual Growth Rate)

While both annualized return and CAGR are measures used to assess investment performance, they have distinct differences:

  • Annualized Return: Represents the average rate of return over a specific period, calculated as ((Ending Value / Beginning Value)^(1/n)) - 1, where 'n' is the number of periods (e.g., years).
  • CAGR (Compound Annual Growth Rate): Represents the constant rate of return that would be required for an investment to grow from its initial value to its ending value, assuming the investment had been compounding at a steady rate annually over the specified period.

Key differences:

  • Annualized return considers the actual return over a period, while CAGR assumes a steady growth rate.
  • CAGR is useful for investments with varying returns over time, while annualized return is more suitable for investments with consistent returns.
  • Annualized return can be calculated for any period, whereas CAGR is typically calculated for longer-term investments.

Both measures provide valuable insights into investment performance, but understanding their distinctions can help investors make more informed decisions.

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