- Annual Return
- The return an investment provides over a period of time, expressed as a time-weighted 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.
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 – a $15 profit. The investor also received a total of $2 in dividends over the five-year 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)) – 1 = 13.1% annual return
Annual-return statistics are commonly quoted in promotional materials for mutual funds, ETFs and other individual securities.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
annual return — Under the Companies Act 1985 in each calendar year a company must file a return in standard form at the Companies Registry showing details of its directors shareholders and other specified information (sections 363 and 364 Companies Acts 1985).… … Law dictionary
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annual return — A document that must be filed with the Registrar of Companies within seven months of the end of the relevant accounting period (ten months for private companies). Information required on the annual return includes the address of the registered… … Accounting dictionary
annual return — A document that must be filed with the Registrar of Companies within seven months of the end of the relevant accounting period (ten months for private companies). Information required on the annual return includes the address of the registered… … Big dictionary of business and management
annual return — yearly yield, yearly proceeds, return which is earned in one year … English contemporary dictionary
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annual return — /ˌænjuəl rɪ tɜ:n/ noun an official report which a registered company has to make each year to the Registrar of Companies … Dictionary of banking and finance
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compound annual return — CAR The total return available from an investment or deposit in which the interest is used to augment the investment. The more frequently the interest is credited, the higher the CAR. CAR = 1 + (nominal rate number of times interest paid per… … Big dictionary of business and management
compound annual return — See: compound annual growth rate … Financial and business terms