Figures are illustrative only, ignore charges and tax, and are not a forecast or personal recommendation.
This calculator converts a starting value and an ending value into a percentage return — both the total return over the whole period, and the annualised (compound annual growth) rate, which makes it possible to compare investments held for different lengths of time on a like-for-like basis.
Total return vs annualised return
Total return is simply the overall percentage gain or loss between the purchase value and the current value, regardless of how long that took. Annualised return spreads that same gain evenly across each year of the holding period, expressed as a compound annual rate. A 50% total return sounds identical whether it happened over 2 years or 10 years, but the annualised figures are very different — roughly 22% a year in the first case versus roughly 4% a year in the second — and the annualised figure is almost always the more useful one for comparing different holdings or deciding whether a return was actually good.
How the maths works
Total return is calculated as (current value minus purchase value) divided by purchase value, expressed as a percentage. Annualised return uses the compound growth formula: it finds the constant annual growth rate that, compounded over the number of years entered, would take the purchase value to the current value. This is the reverse of the calculation used in our Compound Interest Calculator and Investment Growth Calculator, which project forward from an assumed rate rather than calculate the rate that already happened.
Worked example
An investment bought for £10,000 and now worth £14,500 after 5 years has a total return of 45%. Annualised, that works out to roughly 7.7% a year — a figure that's directly comparable to the annual return assumptions used elsewhere on this site, and to other investments' own annualised figures, even if they were held for different lengths of time.
What this doesn't capture
If you made additional contributions or withdrawals during the holding period, this simple purchase-to-current calculation won't accurately reflect your true return — it assumes a single purchase and no further cash flows. It also ignores dividends or income received and spent rather than reinvested (if income was reinvested and pushed up the current value, it's already captured), and it doesn't account for platform or dealing charges paid along the way, which would have reduced your effective purchase value or ongoing return. It's also worth remembering that ongoing charges continue to apply to the current value regardless of past performance.
Frequently asked questions
Why is annualised return usually lower than total return?
Because it spreads the same gain across multiple years using compound growth rather than simple division — for any holding period longer than one year, the annualised figure will always be lower than the total return figure (assuming a positive return).
What's a "good" annualised return?
It depends entirely on the asset class and risk taken. Broad global equity markets have historically averaged high single digits annually over long periods before inflation, though with significant year-to-year variation; cash savings and low-risk bonds have typically returned less. Compare your figure to a relevant benchmark rather than a generic target.
Can annualised return be negative?
Yes — if the current value is lower than the purchase value, both total and annualised return will show as negative, reflecting a loss.
How do I compare this to a savings account rate?
The annualised return figure is directly comparable to an advertised savings account AER (annual equivalent rate) — both express a compound annual growth rate, making them a fair like-for-like comparison of cash savings versus investing.
Does this work for a whole portfolio, not just one holding?
Yes, as long as you can determine a single overall purchase value and current value — though for a portfolio with multiple contributions over time, a proper money-weighted or time-weighted return calculation (usually provided by your platform) will be more accurate than this simplified two-point method.
Common mistakes when calculating investment returns
A frequent error is comparing the annualised returns of two investments held for very different periods without considering whether the underlying assets are actually comparable in risk — a high annualised return on a highly volatile, concentrated holding isn't necessarily "better" than a lower annualised return on a diversified, lower-risk one; the two carry different risk, and returns should generally be judged alongside the risk taken to achieve them, not in isolation.
Another mistake is ignoring the impact of a single unusually good or bad year when judging performance over a short period. A 2-3 year annualised return can be dominated by one exceptional year in either direction, which may not be representative of what to expect going forward. Where possible, look at returns over multiple different time windows (1, 3, 5, and 10 years, for example) rather than relying on any single period.
How do platforms usually display "return" figures?
Most UK investment platforms show both a simple percentage gain/loss and, for longer holding periods, an annualised figure — if only one figure is shown, check which one it is, since a simple percentage over a multi-year period will look larger than the equivalent annualised figure.
What's a benchmark, and why does it matter for judging returns?
A benchmark is a relevant comparison index (for example, a global equity index for a global equity fund) — comparing your annualised return to an appropriate benchmark over the same period tells you whether you're being rewarded for any extra risk or cost versus a simple low-cost alternative.
How do I calculate return if I made several purchases at different times?
This simple calculator assumes a single purchase and a single current value — for multiple purchases at different dates, an accurate return calculation needs to weight each purchase by its size and timing (a money-weighted or time-weighted return), which most investment platforms calculate automatically in your account performance reports.
Should I include dividends I've received and spent, not reinvested?
If dividend income was paid out and spent rather than reinvested, it should ideally be added back to the current value figure to reflect your true total return — otherwise this calculator will understate the actual return your investment produced.