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Annualized return

Annualized return expresses a multi-period result as an equivalent yearly rate, usually using compounding rather than a simple division by the number of years.

By Betta Signals Research Desk · Reviewed October 24, 2026

Plain-English definition: Annualized return expresses a multi-period result as an equivalent yearly rate, usually using compounding rather than a simple division by the number of years.[1]

How the term is used

Annualization helps compare periods of different lengths. For a beginning value, ending value, and elapsed time, the compound annual growth rate is one common method. Results shorter than one year may be extrapolated rather than actually earned for a year.[1]

What to check before relying on it

State the exact dates, cash-flow treatment, fees, and whether the calculation is arithmetic or geometric. A smooth annualized figure can hide large losses and recoveries inside the period.

Example

A two-year gain of 21% annualizes to 10% per year because 1.10 multiplied by 1.10 equals 1.21; dividing 21% by two would miss compounding.

Compound annual growth rate (CAGR)Total returnDrawdown

Research last reviewed: October 24, 2026. This definition is educational and does not evaluate a particular security.

Sources

  1. FINRA: Calculating Your Investment Returns — return calculations, annualization, fees, and comparison cautions. Accessed October 24, 2026.