Sterling Ratio
Calculate Sterling Ratio instantly with the exact formula and a worked example.
Sterling Ratio
Annual return%
Risk-free rate%
Max drawdown, year 1%
Max drawdown, year 2%
Max drawdown, year 3%
Sterling Ratio
1.1
Average drawdown
10%
Classic version (drawdown + 10 %)
0.75
More about: Sterling Ratio
What it calculates
The “Sterling Ratio” calculator computes Sterling Ratio from 5 parameters: annual return (%), risk-free rate (%), max drawdown, year 1 (%), max drawdown, year 2 (%), max drawdown, year 3 (%).
Used by investors to estimate returns, project savings, and analyze a portfolio.
Example calculation
With parameters Annual return = 15 %, Risk-free rate = 4 %, Max drawdown, year 1 = 10 %, Max drawdown, year 2 = 8 %, Max drawdown, year 3 = 12 % the result is 1.1.
How to use
- Enter annual return, risk-free rate, max drawdown, year 1, max drawdown, year 2 and max drawdown, year 3 — each field above is adjustable with a slider.
- Sterling Ratio is calculated automatically as you type.
- Check the worked example below to see the formula applied to real numbers.
- Copy the result or bookmark this calculator.
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FAQ
What is compound interest?
Compound interest means you earn returns not only on your original principal but also on previously earned interest. Formula: A = P · (1 + r/n)^(n·t). Over long periods this produces exponential growth.
How much do regular contributions matter?
A lot. Adding a fixed amount every month and reinvesting earnings dramatically increases the final value, especially over 20–30 years, because each contribution compounds for the remaining term.
What is the Rule of 72?
A quick estimate for doubling time: years ≈ 72 / annual return %. At 8% your money doubles in about 9 years; at 12%, in about 6 years.
What return rate should I assume?
Historically the S&P 500 has returned about 10% per year before inflation (around 7% after). Use a conservative figure for planning and remember that past performance does not guarantee future results.
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