Annualized Return Calculator
Annualized return expresses an investment's total growth as a constant per-year rate, so you can compare results over different time spans on equal footing. It is the same measure as CAGR. Annualized return smooths the path. It does not show volatility, drawdowns, timing of cash flows, or taxes.
Estimate annualized return
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Annualized return
14.47%
The total return is 50.00% over 3 years, equal to 14.47% per year if smoothed through compounding.
Breakdown
- Total return
- 50.00%
- Beginning value
- $10,000
- Ending value
- $15,000
How the Annualized Return calculator works
Annualized return is a time-normalized growth rate. It is useful for comparing holding periods, but it is not a forecast of future yearly returns.
The calculator compares ending value with beginning value, then converts that total growth into the constant yearly compound rate that would produce the same ending value over the selected number of years.
total_return = (ending_value - beginning_value) / beginning_value
annualized_return = (ending_value / beginning_value)^(1 / years) - 1- Beginning value must be greater than zero for the annualized calculation to be meaningful.
- Years must be greater than zero because the formula converts total growth into a yearly compound rate.
- Use values that include reinvested dividends if you want total return instead of price return.
When to use it
Helpful for
- Comparing investments held for different lengths of time.
- Translating a multi-year result into a per-year compound rate.
- Checking whether a strategy kept pace with a benchmark over the same period.
Can mislead when
- Cash was added or withdrawn during the measurement period.
- The path was highly volatile and the smoothed rate hides large drawdowns.
- Beginning or ending values exclude dividends, fees, taxes, or distributions that matter to total return.
Common mistakes
- Comparing total returns across different time periods without annualizing them.
- Using price-only values when dividends were a meaningful part of the return.
- Treating a smoothed annualized rate as if the investment earned that exact return every year.
- Ignoring additions or withdrawals during the period.
Worked example
The default inputs use a 10000 beginning value, a 15000 ending value, and a 3-year period. Total return is 50.00%, and annualized return is 14.47%.
| Input | Value |
|---|---|
| Total return | 50.00% |
| Annualized return | 14.47% |
Frequently asked questions
Total return is the full percentage gain over the whole period. Annualized return smooths that into a per-year rate, which makes a three-year and a ten-year result directly comparable.
Yes. CAGR (compound annual growth rate) is annualized return computed from a beginning and ending value, assuming steady compounding.
Only if your beginning and ending values already reflect reinvested dividends. Using price alone gives price return; using total value gives total return.
Judge it against a broad market benchmark such as the long-run average of the S&P 500, and against your own goals and risk. Consistently beating a low-cost index return is difficult, so a "good" return is one that does so without taking on outsized risk.
Compare returns with fundamentals
Use the screener to compare growth and valuation before relying on backward-looking returns.