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 ... 
TimeWeighted Rate of Return
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Annualized Total Return
The average amount of money earned by an investment each year ... 
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, ... 
Return
The gain or loss of a security in a particular period. The return ...

Investing
Calculating Annualized Total Return
The annualized total return is the average return of an investment each year over a given time period. 
Markets
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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
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 ... 
Markets
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. 
Managing Wealth
Understanding Total Returns
Total return measures the rate of return earned from an investment over a period of time. 
Investing
How To Calculate Your Investment Return
How much are your investments actually returning? Find out why the method of calculation matters. 
ETFs & Mutual Funds
Explaining Annual Returns
Annual return is the standard percentage rate for most investments and credit facilities. 
Managing Wealth
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 ... 
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.

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