Sharpe Ratio Calculator

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Reviewed by David Chen, CFA | Investment Analysis Specialist

Understand your true investment performance by using our Annualized Return Calculator. This tool helps you normalize returns over different time horizons to make better financial decisions.

ac on a calculator

Annualized Return: 0.00%

ac on a calculator Formula:

Annualized Return = [(Ending Value / Beginning Value)^(1 / n)] - 1 Source: Investopedia – Annualized Rate of Return

Variables:

  • Ending Value: The final balance of the investment at the end of the period.
  • Beginning Value: The amount originally invested.
  • n: The number of years the investment was held.

Related Calculators:

What is ac on a calculator?

An annualized return is the geometric average amount of money earned by an investment each year over a given time period. It is often referred to as the ac on a calculator metric because it allows investors to compare the performance of assets held for different durations on an “apples-to-apples” basis.

Unlike simple total returns, which only show the total percentage change from start to finish, the annualized return accounts for the effect of compounding, providing a more accurate picture of long-term growth.

How to Calculate ac on a calculator (Example):

  1. Identify your initial investment (e.g., $5,000).
  2. Identify your final investment value (e.g., $7,500).
  3. Determine the holding period in years (e.g., 3 years).
  4. Divide the final value by the initial value ($7,500 / $5,000 = 1.5).
  5. Raise that number to the power of 1 divided by the years (1.5 ^ (1/3) ≈ 1.1447).
  6. Subtract 1 and multiply by 100 to get the percentage (14.47%).

Frequently Asked Questions (FAQ):

Why is annualized return better than total return?

Total return doesn’t account for time. A 50% return over 1 year is much better than a 50% return over 10 years. Annualization standardizes this.

Can annualized return be negative?

Yes, if the ending value is less than the initial investment, the annualized return will reflect a yearly loss percentage.

Does this include dividends?

To get a “Total Annualized Return,” you should add any dividends or interest received to the Ending Value before calculating.

What is a good annualized return?

It depends on the asset class. Historically, the S&P 500 averages around 10% annually before inflation.

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