Ever wanted to know how much your investment has grown on average over the years? Or

perhaps you are considering a specific investment but not sure if it “performs”.

You may think that the obvious thing to do would be to fire up Google Finance and

having a look at a very pretty graph showing you that the growth for this investment over the

last 10 years was 150%. Awesome, right?! 150%/10 years is 15% per year which is a really

sweet deal!

If only. No, unfortunately it is a bit more involved than that. The 150% over 10 years

you see is compound growth and the value you are looking for is quite a bit lower than

that… sorry 😦

So disappointments aside, how do you calculate annualised growth?

### The Maths

- Get the starting value of the investment for the period you have select. For ease of

the calculation we’ll use the cent value. So let’s assume a value of R10,00 which is 1000 cents. - Now get the end value for the investment over the period. We’ll stick with our example and

use R25,00 which is 2500. - Get the “year fractional value” (I made that up for a lack of a better name) which is basically

1 over the amount of years in this period: 1/[years]. So in this example of 10 years it will be 1/10 or 0.1 - Subtract the starting value from the end value and divide that by the starting value:

`(2500 - 1000)/1000 = 1.5`

- Now add 1 to the return rate (step 4) and raise it by the year fractional value (calculated in step 3) and subtract

1 from the result. That might sound confusing but it looks like this:

`((1.5+1)^0.1)-1`

Simplified it reads: `(2.5^0.1)-1`

Simplified some more: `(1.0959)-1`

And the result: `0.0959`

(your annualised growth percentage).

- Now multiply the number by 100:
`9,59%`

### Let’s Recap

Let’s use real data – STX40 between 2 Jan 2004 and 30 Dec 2016 (13 years):

Starting value: `960`

End value: `4382`

Year fraction: 1/13 = `0.077`

`(4382-960)/960 = 3.56`

`((3.56+1)^0.077)-1 = 0.1239`

Annualised growth: `12.39%`

I know, it feels a bit like high school all over again. That’s why I made a calculator

for you to use. You’re welcome.

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