an·​nu·​al·​ize | \ ˈan-yə(-wə)-ˌlīz How to pronounce annualize (audio) , -yü-ə- \
annualized; annualizing

Definition of annualize

transitive verb

: to calculate or adjust to reflect a rate based on a full year quarterly returns yielding at an annualized rate of seven percent

Examples of annualize in a Sentence

Recent Examples on the Web The rules for calculating the figures don’t allow companies to annualize most pay figures. Sarah Nassauer, WSJ, "At Walmart, the CEO Makes 1,188 Times as Much as the Median Worker," 20 Apr. 2018 Companies are allowed, for example, to annualize the pay of a full-time employee who starts midyear. Robert Pozen And, WSJ, "The Fix for Misleading ‘CEO Pay Ratios’," 19 Mar. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'annualize.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

First Known Use of annualize

1906, in the meaning defined above

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Time Traveler for annualize

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The first known use of annualize was in 1906

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Last Updated

24 Apr 2020

Cite this Entry

“Annualize.” Dictionary, Merriam-Webster, Accessed 29 May. 2020.

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Financial Definition of annualize

What It Is

Annualize means to express a rate in terms of its annual equivalent.

How It Works

The concept is best illustrated with an example:

Assume a portfolio generates a 1% return in one month. The monthly rate can be annualized by multiplying 1% by 12 (because there are 12 months in one year) to produce a 12% annualized return. Note that this number is just an estimate of what the portfolio's return would be if its performance was exactly the same for 12 months. It is not a measure of the portfolio's actual return.

To calculate an annualized return for an investment that compounds, use the following formula instead: ((1 + R) N – 1), where R is the periodic rate and N is the number of periods in one year.

Why It Matters

Annualizing returns makes it easier to compare them across time periods or among different companies, portfolios, stocks, etc. If you are trying to choose between two gold funds, one with an annualized return of 10% and one with an annualized return of 11%, all things being equal, you'd likely choose the fund with the higher annualized yield.

Source: Investing Answers

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