New to this? Read the plain English guide first.
See your total and yearly return from what you put in and what it became.
Return on investment measures how much you gained or lost compared with what you put in. The annualized return smooths the result into a yearly rate so you can compare investments held for different lengths of time.
ROI equals ending value minus starting amount, divided by the starting amount. Annualized return equals the ending value divided by the starting amount, raised to the power of one over the number of years, minus one.
You invest $10,000 and it grows to $14,500 after four years. The total return is 45 percent. The annualized return is about 9.7 percent per year. A different investment that made 45 percent in two years would have a much higher annualized rate, which is why the years matter.
Compare investments by annualized return and also by risk. A higher return with a 60 percent drawdown along the way is a very different experience from a steady return. Remember to include fees and taxes when you can.
Ignoring time, leaving out dividends and contributions, and comparing returns from very different risk levels.
Try the compound growth calculator and the Rule of 72 calculator. See every term in the investing glossary, try more tools in investor tools, or test yourself in Stock Jeopardy.
For education only, not investment advice. Results are estimates based on the numbers you enter.