It is very easy and simple. You need to provide the two inputs i.e Current Value and Original Value. This is because there are true returns of any portfolio will be including all cash flows, and the XIRR function in Excel is best suitable for calculating the returns. I want to calculate the cumulative return of a series of monthly fund returns over a monthly, quarterly and annual basis. When all data has been gathered, then it would be easy to calculate the annualized return. How to calculate Annualized Return and Annualized Standard Deviation? The cell shows the average annual rate of return after Excel finishes calculating it. Specifically, I have the annual returns for the S&P 500 from 1976 through 2005. This make the XIRR feature Microsoft Excel something that simplify the calculation. Though, IIUC, this isn't universally accepted. One approach I've seen is to annualize each month separately (using [((1 + R)^12) - 1] x 100) and then average the annualized rates. I am attaching one of my excel files for reference. I would like to be able to calculate the annualized (compounded or CAGR) rate of return over various time frames. I am looking for a formula that will calculate annualized return. It takes a list of dates and payments and calculates the average rate of return. There is no formula listed under tools for Annualized return or CAGR in excel. The Sharpe Ratio calculation multiplies the monthly returns by 12 to convert from monthly returns to year and multiplies the bottom volatility term by sqrt(12). Excel’s Internal Rate of Return (IRR) function is an annual growth rate formula for investments that pay out at regular intervals. Since 12 / sqrt(12) = sqrt(12) the conversion of the monthly Sharpe ratio to the annualized ratio simplifies to just multiplying by the monthly Sharpe ratio by sqrt(12). Example: Jan: +3% Feb: +4% This tutorial explains the syntax of the Excel IRR function and shows how to use an IRR formula to calculate the internal rate of return for a series of annual or monthly cash flows. Yes, assuming that you array-enter the PRODUCT formula (press ctrl+shift-Enter instead of just Enter); and assuming that COUNT(RANGE) is 12 and 60 respectively, which means that the last ratios in the ranges are Month13/Month12 and Month61/Month60 respectively. … one year. You can also use "365" instead of "1" to calculate the daily return … Rate of Return Formula in Excel (With Excel Template) Here we will do the same example of the Rate of Return formula in Excel. Once you have the overall return, you can then calculate the annualized return. 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