What is the 'Compound Return'
The compound return is 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)".
BREAKING DOWN '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 Interest
Compound Interest is interest calculated on the initial principal ... 
Effective Annual Interest Rate
Effective Annual Interest Rate is an investment's annual rate ... 
Periodic Interest Rate
The interest rate charged on a loan or realized on an investment ... 
Discrete Compounding
Discrete compounding refers to the method by which interest is ... 
Annual Percentage Yield  APY
The effective annual rate of return taking into account the effect ... 
Stated Annual Interest Rate
The return on an investment that is expressed as a peryear percentage, ...

Investing
Overcoming Compounding's Dark Side
Understanding how money is made and lost over time can help you improve your returns. 
Investing
Accelerating Returns With Continuous Compounding
Investopedia explains the natural log and exponential functions used to calculate this value. 
Investing
Learn Simple And Compound Interest
Interest is defined as the cost of borrowing money, and depending on how it is calculated, can be classified as simple interest or compound interest. 
Investing
How To Calculate Your Investment Return
How much are your investments actually returning? Find out why the method of calculation matters. 
Retirement
Why Investors Should Care About Compound Interest
Learn about compounding interest and how it impacts savings decisions, debt management, investment strategies and retirement planning. 
Investing
The Effective Annual Interest Rate
The effective annual interest rate is a way of restating the annual interest rate so that it takes into account the effects of compounding. 
Investing
How does Compound Interest Work?
A quick way to understand the impact of compound interest is to ask yourself if you’d rather receive $100,000 a day for a month, or start with a penny on day one and double it every day for those ... 
Personal Finance
How Interest Rates Work on Savings Accounts
Here's what you need to know to grow your rainyday fund. 
Investing
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 ... 
Investing
The Difference Between Compounding Interest and Simple Interest
Interest is the cost a borrower pays to use someone else’s money. Interest can be either simple or compounded.

What is the difference between stated annual return and effective annual return?
Essentially, the effective annual return accounts for intrayear compounding, and the stated annual return does not. The ... Read Answer >> 
What formula can I use to calculate interest on interest?
Find out more about compounding interest, what it measures and how to calculate the amount of compound interest accrued using ... Read Answer >> 
How do mutual funds compound interest?
Learn how mutual funds can grow wealth over time through the magic of compound interest by reinvesting dividends back into ... Read Answer >> 
How often is interest compounded?
Understand what compound interest is and how the compounding of interest applies to the benefit of investors or creditors, ... Read Answer >> 
Other than my savings account, what other types of holdings compound my interest?
Understand the benefits of compounding interest, and learn the types of investments that offer compounding in addition to ... Read Answer >>