
Measuring Portfolio Returns  Introduction
Measuring Portfolio Returns
There are a number of ways to calculate the investment return of an account. Some of these (real return and riskadjusted return) were discussed in the Quantitative Methods section . You will not be tested on the actual formulas, so they are not included here (other than those provided for clarity). In this section we'll focus on return measures such as the following:

Return on investment  This is the classic measure of performance, taking into account all cash flows (including dividends, interest, return of principal, and capital gains). To calculate, simply divide the sum of all cash flows by the number of years the investment is held, and then divide that amount by the original amount invested.
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Holding period return  Refers to the return for the period of time the investment was actually held. This can be more meaningful than an annualized rate of return, particularly for investments held short term.
The standard deviation of returns depends on the holding period, since stock returns are more volatile over shorter periods. As a result:

the shorter the holding period, the greater the variability of the return;
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the longer the holding period, the smaller the variability of the return.
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the shorter the holding period, the greater the variability of the return;

Annualized return Also referred to as average return, this expresses the geometric rate of return of a portfolio over any given period into an annual basis  in other words, it provides the average annual return per year over that period.
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Riskfree rate of return  The current rate for 90 day Treasury bills is typically used in calculations such as riskadjusted return and the Sharpe ratio.
Â  Total return  This incorporates the rate of return from all sources, including appreciation (or depreciation), dividends and interest.
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Total Return
When measuring performance, the actual rate of return of an investment ... 
Annual Return
The return an investment provides over a period of time, expressed ... 
Average Return
The simple mathematical average of a series of returns generated ... 
Target Return
A pricing model that prices a business based on what an investor ... 
Annualized Total Return
The average amount of money earned by an investment each year ... 
Return
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