Annual Return

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Definition of 'Annual Return'

Annual return is the percentage change in the value of an investment over a one-year period. It is calculated by dividing the ending value of the investment by the beginning value and then subtracting 1. For example, if an investment is worth $100 at the beginning of the year and $110 at the end of the year, the annual return is 10%.

Annual return is a common measure of investment performance. It is important to note that annual return does not take into account the time value of money, which means that it does not account for the fact that a dollar today is worth more than a dollar tomorrow. For this reason, annual return is often used in conjunction with other measures of investment performance, such as the compound annual growth rate (CAGR).

Annual return can be calculated for any type of investment, including stocks, bonds, mutual funds, and real estate. It can also be calculated for individual investments or for a portfolio of investments.

Annual return is a useful tool for comparing the performance of different investments. However, it is important to remember that annual return is only one measure of investment performance and that it should not be used in isolation.

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