Annualised Return Calculator NZ

This calculator turns a total investment return over several years into an annualised return, the single per-year figure that lets you compare investments held for different lengths of time on a fair basis. It is one of the most useful numbers an investor can work out, because raw figures can mislead. An investment that grew fifty percent sounds impressive until you learn it took ten years, while another that grew thirty percent in three years was actually doing far better. The annualised return strips that away by finding the steady compounding rate that would have taken your starting value to your ending value over the time you held it, which is the same idea as a compound annual growth rate. You enter the starting value, the ending value, and the number of years you held the investment, and the calculator returns the annualised return per year along with the total return over the whole period. Use it to compare funds, shares or property held over different timeframes, and to sense-check the headline numbers in fund reports, which are usually quoted as annualised returns. Note it assumes no money was added or withdrawn along the way; regular contributions would give a different money-weighted return. Past returns are no guarantee of future ones. This is general information, not financial advice.

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$
$
8.45%
annualised return a year
Total return50%
Gain$5,000

Assumes no contributions or withdrawals along the way. Annualised return compounds, so it is lower than the total return divided by the years. Past returns do not predict future ones.

How it works

The total return is the ending value divided by the starting value, minus one. The annualised return is the ending value divided by the starting value, raised to the power of one over the number of years, minus one. This gives the steady yearly compounding rate that links the two values.

Worked example

Growing 10,000 dollars to 15,000 dollars over 5 years is a 50 percent total return. Annualised, that is about 8.45 percent a year, noticeably less than the 10 percent you would get by simply dividing 50 by 5, because returns compound.

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Frequently asked questions

What is annualised return?

Annualised return is the steady yearly rate that would turn your starting value into your ending value over the period, with compounding. It is the same idea as a compound annual growth rate, and it lets you compare investments held for different lengths of time.

Why not just divide the total return by the years?

Because returns compound. A 50 percent total return over 5 years is not 10 percent a year; it is about 8.4 percent a year compounded. Dividing overstates the yearly rate, so annualising correctly matters when comparing investments.

Does this account for contributions?

No, this is a simple start-to-end annualised return assuming no money was added or withdrawn along the way. If you made regular contributions, the money-weighted return differs, and you would need a more detailed calculation.