How to Calculate Annualized Performance
Tracking investments in the market makes realizing how much money you have gained or lost in a year fairly simple. This formula will work with your overall investment performance as well as with individual stocks, bonds and other forms of chosen investment. If you can keep your eye on the ups and downs of your portfolio, you can track what investments need to be re-evaluated to get the most out of your money.
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Instructions
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Calculating Annualized Performance
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1
Figure how far back you want to go to find the value of your funds. Are you calculating when you first started investing 10 years ago, or are you calculating one year ago from today? It does not matter, but these numbers need to be defined before we begin. Let's say you started investing 5 years ago with $100,000, and now your investments are worth $150,000. Find your starting point for investing and your current point of funds.
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2
Divide your ending value with your beginning value.
150,000 / 100,000 = 1.5
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3
Raise your findings in step 3 to the power 1 over how many years you have been investing. (We use five for this example only, as specified in the Overview.)
1.5 ^1/5 =1.08447177
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4
Subtract 1 from your findings in step 4.
1-1.0845 = .0845 = 8.45%
Using this example, your investments would have grown 8.45% in the past 5 years.
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1
Tips & Warnings
For a fee, brokers and Websites will do this for you, but they will use a similar formula. Most mutual funds will put the portfolio performance percentage on your account statements.
It is very important to keep a paper trail when investing. This includes all investment updates and all monthly statements, for up to the past 3 years. If you do not receive statements, make sure to check your portfolio monthly for any changes online. Keep an excel spreadsheet of your findings.
