ROI Annualized Calculator – Rate/Year

Total ROI hides time. Two investments that both return 60% are worlds apart if one did it in 3 years and the other in 8, so analysts convert everything to a yearly rate by raising the growth ratio to the power of 1/years and subtracting one — the geometric mean, which compounds fairly. Example: 25,000 that grows to 40,000 in 5 years returns (40,000 ÷ 25,000)^(1/5) − 1 = 1.6^0.2 − 1 ≈ 9.86% per year, even though 60% ÷ 5 = 12% looks plausible. The gap widens with time: the same 60% over 10 years is only 4.8% annualized. Losses are handled honestly too — an account that rises 50% then falls 33% lands back at zero annualized, exactly matching reality, while arithmetic averages would wrongly print +8.5%.

1. 1

   Step 1

   Enter the initial value invested and the final value achieved.

2. 2

   Step 2

   Enter the holding period in years (use decimals for months).

3. 3

   Step 3

   Read the annualized rate — the constant yearly growth equivalent.

4. 4

   Step 4

   Benchmark against 7% long-run equity returns or your alternatives.

• Dividing total by years

• Ignoring cash flows

• Annualizing short bursts