Annualized Rate of Return

Explore commonly used personal finance terms.

The annualized rate of return converts the total return on an investment into an equivalent yearly rate, allowing for comparisons across investments held for different periods. This metric factors in compounding, showing what the return would be if the investment were held for a full year. It is valuable for comparing various assets and assessing portfolio performance over time, helping investors make better-informed decisions about asset allocation and diversification based on expected returns.

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