Which figure should I look at?

Annualised, for anything over a year, because it is comparable across periods. An absolute return over five years cannot be compared with one over three.

When are they the same?

At exactly one year. Below a year annualising overstates by projecting forward, and above it the division overstates instead.

Investmentreturns

Absolute vs Annualized Return Calculator

Absolute and annualised return side by side. Dividing an absolute return by the number of years always overstates, and the error grows with both the return and the period.

Also called: cagr vs absolute return, annualised return calculator.

Annualised return

10.8%

10.8% a year against an absolute 85% over 6 years. The naive division gives 14.17%, which overstates by 3.37% points. The gap widens with the period.

Absolute return

85%

Absolute divided by years

14.17%

How much the division overstates

3.37%

Total gain

$85,000.00

Money multiplied by

1.85

When the two agree

The two agree only over exactly one year.

How this is calculated

An estimate, not an offer or a guarantee. Projected returns assume the rate you entered holds for the whole term, which no market does.

Method and background

This is what the calculation gives for the numbers you entered. It is an estimate, not advice, and it knows nothing about your situation beyond those numbers. Rules for United States change on a published schedule; the effective date is shown on every rule-based tool.

How this is calculated

Absolute return measures the whole change. Annualised return is the constant rate that compounds to the same result, which is a root rather than a division. They coincide only over exactly one year. Over longer periods the division is always higher, because it credits none of the return with having compounded. Fund marketing sometimes quotes absolute return for periods over a year for precisely this reason, so checking which one is being shown matters.

the annualised rate is a root, not a division, and the two only agree at one year

n: Years

Method and limits

What it assumes

A single investment held throughout with no additions.

What it deliberately does not model

Neither figure says anything about the path, and two funds with identical CAGR can differ enormously in volatility.

Formula version 1.0.0 · definition 1.0.0 · United States · Report a problem with this calculator

Frequently asked questions

Which figure should I look at?: Annualised, for anything over a year, because it is comparable across periods. An absolute return over five years cannot be compared with one over three.
When are they the same?: At exactly one year. Below a year annualising overstates by projecting forward, and above it the division overstates instead.