Annual Return
Table of Contents:
Definition of Annual Return
Annual Return refers to the percentage increase or decrease in the value of an investment or asset over a one-year period.
It is a financial metric commonly used by investors and analysts to assess the performance of an investment or compare the returns of different investment opportunities.
What is an Annual Return?
Annual Return is a crucial metric for investors because it helps them evaluate the performance of their investment choices and make informed decisions.
It enables investors to understand how well their investments have performed over time and helps them assess the potential risks and rewards associated with different investment options.
Additionally, when comparing investment opportunities, the annual return provides a standardized way to evaluate their relative performance.
How to calculate Annual Return?
The formula to calculate the Annual Return is as follows:
Annual Return = ((Ending Value - Beginning Value) / Beginning Value) * 100
Where:
- Ending Value: The value of the investment or asset at the end of the one-year period.
- Beginning Value: The initial value of the investment or asset at the beginning of the one-year period.
The result is expressed as a percentage, representing the rate of growth or decline in the investment's value over the course of one year.
A positive annual return indicates a profit or gain, while a negative annual return indicates a loss or decline in value.
