DEFINITION of 'Compound Return'
The rate of return, usually expressed as a percentage, that represents the cumulative effect that a series of gains or losses have on an original amount of capital over a period of time. Compound returns are usually expressed in annual terms, meaning that the percentage number that is reported represents the annualized rate at which capital has compounded over time.
When expressed in annual terms, a compound return can be referred to as a "compound annual growth rate (CAGR)".
INVESTOPEDIA EXPLAINS 'Compound Return'
For example, if an investment fund claims to have produced a 10% annual compound return over the past five years, this means that at the end of its fifth year, the fund's capital has grown to a size equal to what it would be if the funds on hand at the beginning of each year had earned exactly 10% by the end of each year.
In other words, suppose you started with an initial investment of $1,000. If you multiply 1,000 by 1.1 five times, you will end up with about $1,611. If an investment of $1,000 ended up being worth $1,611 by the end of five years, the investment could be said to have generated a 10% annual compound return over that fiveyear period.
However, this does not mean that the investment actually appreciated by 10% during each of the five years. Any pattern of growth that led to a final value of $1,611 after five years would equate to a 10% annualized return. Suppose the investment earned nothing for the first four years, and then earned $611 in its last year (a 61.1% return for the year). This would still equate to a 10% annual compound return over the fiveyear measurement period, since the final amount is still equal to what the $1,000 would have grown to if it had appreciated by a steady 10% each year.

Compound Annual Growth Rate  CAGR
The yearoveryear growth rate of an investment over a specified ... 
Return On Investment  ROI
A performance measure used to evaluate the efficiency of an investment ... 
Compound Interest
Interest calculated on the initial principal and also on the ... 
Capital
1) Financial assets or the financial value of assets, such as ... 
Compound Net Annual Rate  CNAR
The return on an investment after taking tax implications into ... 
Cumulative Return
The aggregate amount that an investment has gained or lost over ...

Investing Basics
Overcoming Compounding's Dark Side
Understanding how money is made and lost over time can help you improve your returns. 
Forex Education
Compound Annual Growth Rate: What You Should Know
The CAGR is a good and valuable tool to evaluate investment options, but it does not tell the whole story. 
Fundamental Analysis
What's a Tangible Asset?
Tangible assets are property owned by a business that can be touched  they physically exist. Examples include furniture and fixtures, computer hardware, delivery equipment, leasehold improvements ... 
Fundamental Analysis
Cash Flow From Operating Activities
Cash flow from operating activities is a section of the Statement of Cash Flows that is included in a company’s financial statements after the balance sheet and income statements. 
Fundamental Analysis
What are the most common issues with Serial Correlation in stocks?
Read about the concept of serial correlation in stock returns, and learn why market analysts are divided about the efficacy of trading based on stock patterns. 
Fundamental Analysis
What are the components of shareholders' equity?
Understanding company valuation figures, such as shareholders' equity, can be a powerful tool in assessing the financial strength of a business. 
Trading Strategies
How effective is creating trade entries after spotting a Sanku (Three Gaps) Pattern?
Learn about the sanku, or three gaps, pattern including formation, interpretation and additional confirmation necessary to establish effective trades. 
Trading Strategies
How do I build a profitable strategy when spotting a Rounding Bottom pattern?
Understand the basics of the rounding bottom pattern, also known as the saucer, including formation and optimal entry and exit points. 
Trading Strategies
How do I build a profitable strategy when spotting a Runaway Gap pattern?
Understand the basics of the runaway gap and how to utilize this pattern to establish profitable trade strategies, including necessary confirmations before entry. 
Trading Strategies
How effective is creating trade entries after spotting a Runaway Gap pattern?
Understand the basics of the runaway gap and why strategies based on this signal, unlike other types of gaps, have only middling effectiveness.