Personal Finance

What is "Rates for all terms over 1 year are annualized"?

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  • Oct 11th, 2012 7:48 pm
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Deal Expert
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Nov 2, 2003
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What is "Rates for all terms over 1 year are annualized"?

3 Month YTD 1 Year 2 Year 3 Year 5 Year
3.6% 6.9% 11.4% 4.8% 5.6% 2.7%


Those are my personal rate of returns for the various years.

Under 5 year it says 2.7%. Is that 2.7% per year for the last 5 years? or is that 2.7% total?

i.e. my portfolio was $100 5 years ago and now it's $102.7? Or it was $100 5 years ago and it's $113 today?
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Jr. Member
Aug 31, 2012
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An annualised rate is the rate per year (i.e. per annum). So if your $100 grew to $150 in one month, that would be an annualised return of 600%. Similarly, if your $100 grew to $150 in two years, it would be an annualised return of 25%. (In your example, it appears that only terms over 1 year are annualised, so for less than 1 year, it is the rate over the actual time period, not per year.) Note: In my calculation examples I have assumed no compounding... it might vary how it's actually calculated by whoever is calculating this.
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so my portfolio's five year performance means it averaged 2.7% return every year in the past 5 years right?
Jr. Member
Aug 31, 2012
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There isn't enough information to say. It could mean that it averaged 2.7% return per year over the last five years, or it could mean that in the fifth year, the return was 2.7%. Considering the title of the thread, it probably means the former, but I'm just speculating.
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Dec 27, 2006
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actng wrote: 3 Month YTD 1 Year 2 Year 3 Year 5 Year
3.6% 6.9% 11.4% 4.8% 5.6% 2.7%


Those are my personal rate of returns for the various years.

Under 5 year it says 2.7%. Is that 2.7% per year for the last 5 years? or is that 2.7% total?

i.e. my portfolio was $100 5 years ago and now it's $102.7? Or it was $100 5 years ago and it's $113 today?
What is "Rates for all terms over 1 year are annualized"?

Portfolio after term under or equal to 1 year.
Invested 3 Months ago: $100 * (1 + 0.036) = $103.60
YTD (Invested at the beginning of the year): $100 * (1 + 0.069) = $106.90
Invested 1 Year ago: $100 * (1 + 0.114) = $111.40

Portfolio after term over 1 year.
2 Year: $100 * (1 + 0.048) ^ 2 = $109.83
3 Year: $100 * (1 + 0.056) ^ 3 = $117.76
5 Year: $100 * (1 + 0.027) ^ 5 = $114.25
Jr. Member
Aug 31, 2012
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Max's calculations assume the figures were calculated with annual compounding, which they may have been, but (as I said above) that isn't given.
Deal Fanatic
Jul 1, 2007
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Usually it's a given that they're annual compound rates of return, especially if these are posted on some sort of official document with disclaimers and such.

Also, nobody ever anualizes rates of return over less than a year because it makes things look all inflated. This is usually standard across the investment industry (actual rates over a year and less and anualized over periods greater than a year). A rate over 1.5 years is also generally annualized to avoid it looking inflated.
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
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thanks guys
so my money grew a total of 14% over last 5 yrs! yay

why is there no 4 yr?
Deal Fanatic
Jul 1, 2007
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14.24%!

4 year is just superfluous information. People don't look at their investments like that, it's usually "what did it do in the short term (1yr), moderately short term (3yr), moderately long term (5yr), long term (10yr)?"
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.

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