How to Calculate YTD Annualization

by Jackie Lohrey

Calculating year-to-date, or YTD, annualization is an important part of valuing potential and current investments. It allows you to project a short-term rate of return over the remaining months in a year in order to determine whether holding the investment is a wise choice. Calculating YTD annualization is less difficult when you use a two-step process that first produces a calendar YTD and then extends the calculation to annualize results.

Get the current value of your investment and subtract this amount from the initial investment amount. This number -- whether positive or negative -- is your starting point for calculating a calendar YTD return on your investment.

Convert your current profit or loss to a calendar YTD percentage by first dividing it by the amount of the initial investment and then multiplying this number by 100. If you initially invested $5,000 and today your investment is worth $5,500, the calculation will display as (2500/5000) * 0.1 and the result will be a calendar YTD return of 10 percent.

Get an annualization factor -- a number that allows you to extend your current rate of return over the remaining months in the year -- by dividing the number of the month you are currently in by 12. For example, if you are calculating YTD annualization in May, divide 12 by 5 to get an annualization factor of 2.4.

Extend the calculation and get a YTD annualization by multiplying calendar YTD return by the annualization factor. If your YTD calendar return is 10 percent and the annualization factor is 2.4, multiplying 0.10 * 2.4 gives you a YTD Annualization of 0.24, or the expectation that by year end you will achieve a return on your investment of 24 percent.

Tip

  • Get the current value of your investment by looking it up on sites such as Barcharts or Nasdaq, or by contacting your financial planner.

Items you will need

  • Calculator

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