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The cumulative returns divided by the number of years, annualised as a percent gives the Annualised Rate of Return. This allows investors to be more objective regarding their future return expectations.

An Annualised Rate of Return can be calculated for any investment, for example, a Stock or a Mutual Fund. The calculation gives an average percentage return an investor would have received each year for that investment. Now, standards in the Investment Industry prevents short term performance being annualised, for example, quarterly returns cannot be annualised. The one-year annual performance over a year of a Mutual Fund or Stock, can vary widely depending on the securities markets, the economy and the specific investment strategy. The idea behind annualising returns is to allow investors to be more objective in comparing the differing returns of investments over multiple periods of time.


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Warren William

Meet the author behind Smartest-Data. Warren William has a career in Finance and Investments extending over 35 years, both on the Buy Side and Sell Side. His most recent roles include, developing Institutional Risk Management Programs for managing Equity and Fixed Income Risk.  Prior to this Warren William work in Alternative Investments, in Investment Management and as a Buy Side Equity Analyst. Warren William brings a wealth of knowledge and expertise to the table, providing in-depth analysis and commentary on the latest trends in the Stock Markets. Contact information: or Telegram +393339034488

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