What your returns work out to in a year
Turning a total change over several years into a yearly figure, so one year can be compared with another.
Your numbers
What that gives you
Yearly rate
17%
- Total change over the whole period
- 60%
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How this works
A total of 60% over three years is not 20% a year. Growth compounds, so the yearly figure that produces 60% over three years is lower than a third of it.
This is the figure to use when you want to compare a long stretch with a short one, or your own record with anything quoted in yearly terms.
It says nothing about how the journey went. The same yearly figure can come from a steady climb or from one enormous year and two flat ones.
Questions people ask
- Is this the same as average return?
- No. A simple average adds the yearly figures and divides. This compounds them, which is why a year of +50% followed by a year of −50% averages zero but actually leaves you down 25%.
- What period should I use?
- Whatever period you actually held for. Picking the start date that flatters the number is the most common way people mislead themselves with this one.
What this does not say: This describes what already happened to figures you typed. It is not a forecast and not a rate anyone is offering you.