Annualized Return Calculator
Turn a total return over a holding period into an annualized (geometric) yearly return, with the equivalent growth of $10,000.
How it works
Annualized return = (1 + total return)^(1 ÷ years) − 1
A total return hides how long it took to earn. Annualizing restates it as the equivalent steady yearly rate using a geometric root, which respects compounding. This is the only fair way to compare a two-year gain against a five-year one: a 50% return is excellent in one year and mediocre over ten.
Worked example
A 50% total return over 2.5 years is (1 + 0.50)^(1 ÷ 2.5) − 1 ≈ 17.61% a year. Put differently, $10,000 grew to $15,000 over that stretch — the same endpoint a steady 17.61% annual return would reach.
Frequently asked questions
Why not just divide the total return by the years?
That simple average ignores compounding and reads too high. The geometric root gives the true steady rate that reproduces the same ending value.
What is the difference from CAGR?
None mathematically — CAGR starts from a beginning and ending value, while this starts from a total-return percentage and a period. Both compute the same geometric annual rate.
Does this include dividends or fees?
Only if they are already baked into the total return you enter. Use a total return that reflects reinvested income and is net of fees for a realistic figure.
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Educational estimate, not investment or tax advice. Returns are never guaranteed and past performance does not predict the future. Confirm with a licensed advisor.