How to Convert Daily Returns to Annual Returns

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The most useful expression of an investment's returns is on an annual basis, so it's important to know how to convert daily (and weekly, monthly, etc.) returns into annual. Here's the procedure, so you can use it in your own portfolio.

First, determine the return per day, expressed as a decimal. For a daily investment return, simply divide the amount of the return by the value of the investment. If the return is already expressed as a percentage, divide by 100 to convert to a decimal.

Add 1 to this figure and raise this to the 365thpower. Then, subtract by 1. Finally, to convert this to a percentage, multiply by 100.

For example, let's say that you have an investment that pays a 0.03% daily return, which in decimal format is 0.0003. From this information, you can convert to annual returns using the above formula:

Converting other returns to annualYou can convert from weekly or monthly returns to annual returns in a similar way. Simply replace the 365 with the appropriate number of return periods in a year. So, for weekly returns, you would raise the daily return portion of the equation to the 52ndpower. For monthly returns, you would use 12. And, for quarterly returns, you would use the fourth power.

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