Measuring performance
Annualised
A return or volatility figure rescaled to a yearly rate, so different periods can be compared.
How it works
Annualising converts a three-month or five-year figure into "per year" terms. Returns are compounded to annualise; volatility is scaled by the square root of the number of periods.
It makes comparison possible and can badly mislead when the underlying period is short.
Where it misleads people
Annualising a partial year projects a short run forward as if it continues. "Up 9% in two months, 54% annualised" is arithmetic, not a forecast.
Formula
Annualised volatility = period volatility × √(periods per year). Daily to yearly: × √252Related terms
- CAGRThe steady yearly rate that would have turned your starting value into your ending value.
- VolatilityHow much an investment’s returns bounce around their average — the standard measure of risk.
- ReturnWhat an investment gained or lost over a period, as a percentage of what it was worth at the start.
More in Measuring performance
- Backtest
- Yield on cost
- Behaviour gap
- Unrealised profit and loss
- Benchmark
- Tracking error
- Tracking difference
- Calmar ratio
All 29 Measuring performance terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.