Annualized Return
Quick Answer
The geometric average annual rate of return over a multi-year investment period.
Definition
The geometric average annual rate of return over a multi-year investment period.
Explanation
Annualized return = ((Ending ÷ Starting)^(1÷years) − 1) × 100. Converts multi-year performance into a single yearly rate, accounting for compounding. Essential for comparing investments held for different periods.
Example
5-year investment with 30% total return: Annualized = ((1.30)^(1÷5) − 1) × 100 = 5.4% per year.
Frequently Asked Questions
What is Annualized Return?
The geometric average annual rate of return over a multi-year investment period.
How does Annualized Return work?
Annualized return = ((Ending ÷ Starting)^(1÷years) − 1) × 100. Converts multi-year performance into a single yearly rate, accounting for compounding. Essential for comparing investments held for different periods.
Can you give an example of Annualized Return?
5-year investment with 30% total return: Annualized = ((1.30)^(1÷5) − 1) × 100 = 5.4% per year.
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