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.

Annualized Total Return
The average amount of money earned by an investment each year ... 
Compound Return
The rate of return, usually expressed as a percentage, that represents ... 
TimeWeighted Rate of Return
A measure of the compound rate of growth in a portfolio. Because ... 
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 ... 
Annualized Rate
A rate of return for a given period that is less than one year, ...

Professionals
Introduction
FINRA/NASAA Series 66: Section 2 Measuring Portfolio Returns. This section discusses different return measures: return on investment, holding period, annualized, risk free and total returns. 
Fundamental Analysis
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 ... 
Professionals
Measures of Investment Return
Measures of Investment Return 
Investing Basics
Breaking Down The Geometric Mean
Understanding portfolio performance, whether for a selfmanaged, discretionary portfolio or a nondiscretionary portfolio, is vital to determining whether the portfolio strategy is working or ... 
Investing
TimeWeighted Rate of Return
Timeweighted rate of return measures the performance of an investment portfolio by taking a single investment and measuring its growth or loss at the end of a time period. 
Term
Understanding Total Returns
Total return measures the rate of return earned from an investment over a period of time. 
Fundamental Analysis
How To Calculate Your Investment Return
How much are your investments actually returning? Find out why the method of calculation matters. 
Fundamental Analysis
Explaining Annual Returns
Annual return is the standard percentage rate for most investments and credit facilities. 
Professionals
Measuring Portfolio Returns
NASAA Series 65: Section 16 Measuring Portfolio Returns. In this section different types of risk measures discussed and some sample questions. 
Professionals
How To Measure Returns On The Series 65 Exam
An investor who is evaluating the performance of a portfolio manager must take into consideration the impact that any contributions or withdrawals made by the investor will have on the overall ...

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