Annualized Return Calculator
What Is Annualized Return?
An annualized total return is the geometric average amount of money an investment earns each year over a given period. The annualized return formula is calculated as a geometric average to show what an investor would earn over some time if the annual return were compounded.
An annualized total return provides only a snapshot of an investment's performance and does not give investors any indication of its volatility or price fluctuations.
Key Takeaways
- An annualized total return is the geometric average amount of money an investment earns each year over a given period.
- The annualized return formula shows what an investor would earn over a period of time if the annual return were compounded.
- Calculating the annualized rate of return needs only two variables: the returns (Initial Value - Ending Value) for a given period and the time the investment was held.
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