What is 'Annual Return'
Annual return is the return an investment provides over a period of time, expressed as a timeweighted annual percentage. Sources of returns can include dividends, returns of capital and capital appreciation. The rate of annual return is measured against the initial amount of the investment and represents a geometric mean rather than a simple arithmetic mean.
Annual return is the de facto method for comparing the performance of investments with liquidity, which includes stocks, bonds, funds, commodities and some types of derivatives. Different asset classes are considered to have different strata of annual returns.
BREAKING DOWN 'Annual Return'
For example, consider an investor that purchases a stock on January 1, 2000, for $20. The investor then sells it on January 1, 2005, for $35 â€“ a $15 profit. The investor also received a total of $2 in dividends over the fiveyear holding period. In this example, the investor's total return over five years would be $17, or (17/20) 85% of the initial investment. The annual return required to achieve 85% over five years follows the formula for the compound annual growth rate (CAGR):
(37/20) ^(1/5 (yr)) â€“ 1 = 13.1% annual return
Annualreturn statistics are commonly quoted in promotional materials for mutual funds, ETFs and other individual securities.

Compound Return
The rate of return, usually expressed as a percentage, that represents ... 
Annualized Total Return
The average amount of money earned by an investment each year ... 
Average Annual Return  AAR
A percentage figure used when reporting the historical return, ... 
Total Return
When measuring performance, the actual rate of return of an investment ... 
Average Return
The simple mathematical average of a series of returns generated ... 
Absolute Return
The return that an asset achieves over a certain period of time. ...

Investing
Calculating Annualized Total Return
The annualized total return is the average return of an investment each year over a given time period. 
Markets
The Most Accurate Way To Gauge Returns: The Compound Annual Growth Rate
The compound annual growth rate, or CAGR for short, represents one of the most accurate ways to calculate and determine returns for individual assets, investment portfolios and anything that ... 
Managing Wealth
Understanding Total Returns
Total return measures the rate of return earned from an investment over a period of time. 
ETFs & Mutual Funds
Explaining Annual Returns
Annual return is the standard percentage rate for most investments and credit facilities. 
Investing
Why You Should Stick with Stocks over the Long Term
Over the long term, it pays to stick with stocks, despite the inevitable bouts of volatility that wrack stock markets from time to time. 
Investing
Explaining Expected Return
The expected return is a tool used to determine whether or not an investment has a positive or negative average net outcome. 
Markets
What's a Real Rate of Return?
A real rate of return is an annual percentage investment return thatâ€™s adjusted for inflation, taxes or other factors. 
Markets
What's a Return of Capital?
A return of capital is an investment return that is not considered income. 
Investing
Explaining the Geometric Mean
The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio. 
Retirement
Diversification: Your Best Retirement Planning Tool
Holding a mix of investments in your portfolio can help you avoid selling at a loss. This list of asset classes with specific options is a good start.

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