Annual return.
In plain English
Annual return is the percentage change in an investment's value over a year, including any dividends or interest it paid. It is the standard yardstick for comparing investments, because it puts everything on the same one-year footing. Returns bounce around a lot year to year, so a single annual return says little about the long run; an average annual return over many years gives a fuller picture. Always check whether a quoted return counts dividends or only the price move.
01Why it matters
Annual return is the number used to compare investments and project growth, so knowing what it includes keeps you from comparing two things that are not the same.
02The math, step by step
You start the year with 10,000 dollars in a fund and end with 10,800 dollars after dividends. Your annual return is 800 divided by 10,000, or 8 percent.
03What this is NOT
A single year's annual return is NOT the same as an average annual return. One year can swing wildly; the average smooths many years together and is the better guide to long-run growth.