Annualized Rate of Return Calculator

The annualized rate of return is the constant yearly growth rate that turns a start value into an end value over a given period. It is computed exactly like CAGR: annualized return = (end value ÷ start value)^(1 ÷ years) − 1. Unlike a total return, it puts investments held for different lengths of time on a comparable per-year footing.

Annualized return = (ending value ÷ beginning value)^(1 ÷ number of years) − 1. Example: $10,000 growing to $15,000 over 3 years = (15,000 ÷ 10,000)^(1/3) − 1 ≈ 14.47% per year.

Yes, for a single lump sum with no cash flows in or out: CAGR (compound annual growth rate) and annualized rate of return are computed identically. Some sources reserve the term "annualized return" for time-weighted returns on irregular portfolios, but for start-value-to-end-value math the two are the same formula.

Average annual return is arithmetic: total return ÷ years (a linear average). CAGR is geometric: (end ÷ start)^(1/years) − 1. They only match when every year's return is identical. With any volatility, the arithmetic average always overstates the true compounding rate — for example, yearly returns of +10, +10, −5, +10, +10 give an arithmetic average of 7% but a CAGR of only about 6.82%. Try the Compare tab with your own yearly returns.

Because of volatility drag: a loss needs a disproportionately larger gain to recover (a −10% year needs +11.1% to break even). Geometric compounding (CAGR) captures this asymmetry, while arithmetic averaging pretends gains and losses are symmetric. Consistent returns beat bouncy ones at equal arithmetic averages — the gap between the two figures is the "volatility drag".

Yes. If the end value is below the start value, the annualized return is negative — for example, $10,000 falling to $7,000 over 2 years is about −16.33% per year. What it cannot handle is values at or below zero: if either value is zero or negative, the geometric formula is undefined and the calculator will show an error.

Use the same formula with fractional years: annualized = (end ÷ start)^(1/years) − 1. A +30% gain in half a year annualizes to 1.30^2 − 1 = 69% per year. Warning: annualizing short, lucky periods greatly exaggerates returns — treat it as "the pace this would imply if it continued," not a prediction.

Chain the monthly returns into a cumulative return by multiplying (1 + r) for each month, then raise to 12 ÷ months. Example: months of +2%, +1%, −1%, +3% cumulate to +5.06%, and the annualized rate is 1.0506^(12/4) − 1 ≈ 15.93% per year.

Total return = end ÷ start − 1 over the whole period; annualized return = the equivalent per-year rate. A +50% total return over 3 years is about 14.47% per year, not 16.67%. The Simple tab shows all three figures side by side: total return, annualized (geometric) return, and the simple linear average.

Only if you include them in the end value. The formula sees only two numbers — start and end — so price-only figures understate equity returns. Add reinvested dividends and other distributions back into the ending value to get the true total-return annualized rate.

Real annualized return = (1 + nominal return) ÷ (1 + inflation) − 1. A 10% nominal annualized return with 4% inflation is only about 5.77% in real purchasing power. This calculator reports nominal figures; plug in your own inflation number to adjust.

Annualized return (this tool) assumes one start value and one end value with no money added or withdrawn in between — it is time-weighted. IRR and XIRR handle deposits, withdrawals, and irregular dates (money-weighted). If you contributed to or withdrew from the investment during the period, use an XIRR calculator instead; this one would misstate your personal return.

Use =(end_value / start_value)^(1/years) - 1, or POWER((end/start),1/years)-1. With dates in cells A2 (start date) and B2 (end date): =(end/start)^(365.25/((B2-A2)))-1. It is the same math this page uses.

Reverse the formula: end value = start value × (1 + rate)^years. To turn $10,000 into money growing at 7% per year for 10 years, you need $10,000 × 1.07^10 ≈ $19,671.51. Use the Reverse tab to solve for your own target rate.

Three common traps: (1) annualizing short periods extrapolates a lucky stretch; (2) it ignores mid-period cash flows — deposits or withdrawals make the figure meaningless (use XIRR); (3) it hides the path — two investments with identical annualized returns can have wildly different drawdowns and risk. It also must never be confused with the arithmetic average annual return.

No. This tool is for educational purposes only and is not financial, investment, or tax advice. Figures are estimates based on the numbers you enter; past performance does not predict future results. Consult a licensed financial advisor for decisions about your money.