Explore commonly used personal finance terms.
Annualized return allows investors to compare returns on investments held for different timeframes by expressing them on an annual basis. It represents what the return would be if it were constant over a year. This metric is beneficial for evaluating the performance of various investments consistently. When calculating annualized return, one considers compounding, as it factors in reinvested earnings. However, it is not predictive, as future returns may vary due to market conditions.
