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How to Annualize Daily Returns

Updated June 18, 2018

The value of your investments can change on a daily basis. Especially if you invest in volatile investments such as stocks, the daily rate of return can vary greatly. If you would like to project your annualised return based on your daily result, you can do so if you know the starting value of your investment and how much was gained that day. However, the more volatile your investment, the less likely your projection will be accurate.

Divide your daily return by the amount you started with, to find your daily return percentage. For example, if your investment started the day worth £7,150 and gains £1.90, you would divide £1.90 by £7,150 to find the daily return rate to be 0.000272727.

Add 1 to the daily return rate. In this example, you would add 1 to 0.000272727 to get 1.000272727.

Raise the daily return rate plus 1 to the 365th power. In this example, you would raise 1.000272727 to the 365th power to get 1.104653689.

Subtract 1 from the Step 3 result to find the annualised return expressed as a decimal. Continuing the example, you would subtract 1 from 1.104653689 to get 0.104653689.

Multiply the annualised rate of return expressed as a decimal by 100 to get the annualised rate of return expressed as a percentage. In this example, you would multiply 0.104653689 by 100 to find the annualised rate of return based on the daily rate is 10.47 per cent.

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About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."