Download Article Show Download Article If you want to find out how much you're earning on your investments, you likely know that you can subtract the starting value from the ending value. If you then divide that number by the starting value and multiply by 100, you have the basic rate of return. But what if you've had your portfolio for several years? Your portfolio is (hopefully) growing every year, compounding your returns. If you want to compare your portfolio's performance with someone else's, the annualized portfolio return gives you the best way to do this. There are 2 different ways to calculate your annualized portfolio return. Your choice depends on whether you want to control for the effect that your contributions and withdrawals have on your portfolio's performance.[1] This calculation shows you a rate of return that ignores investor behavior (deposits and withdrawals), making it the best way to compare the performance of investment managers and brokers.
Advertisement This calculation shows the impact your deposits and withdrawals have on your portfolio's performance and is best used to compare your portfolio's returns to another individual investor's returns.
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About This ArticleArticle SummaryX To calculate annualized portfolio return, start by subtracting your beginning portfolio value from your ending portfolio value. Then, divide the difference by the beginning value to get your overall return. Once you have your overall return, add 1 to that number. Next, divide 1 by the number of years you're measuring and write that number as an exponent next to your previous answer. Finally, raise your answer to the exponent and subtract 1 from that number to get your annualized return. To learn how to calculate annualized return with Excel, read on! Did this summary help you? Thanks to all authors for creating a page that has been read 521,552 times. Did this article help you?What is the formula of annualized return?To calculate the annualized portfolio return, divide the final value by the initial value, then raise that number by 1/n, where "n" is the number of years you held the investments. Then, subtract 1 and multiply by 100.
How do you calculate annualized rate?The annualized rate occurs for a certain period of time (less than 12 months). It is an annual returns rate estimation that is mathematically extrapolated. To calculate it, you have to multiply the change of returns rate in a single month by 12 to be able to get the years rate.
What is annualized rate of return example?Annualized Rate of Return Examples
The annualized performance is the rate at which an investment grows each year over the period to arrive at the final valuation. In this example, a 10.67 percent return each year for four years grows $50,000 to $75,000.
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