Definitions for

**"compound annual return"**The return an investment would require in order to achieve a set, cumulative...

Measure of the rate at which an investment or portfolio has grown in value over a period of years, averaged out on a yearly basis. Varies from "average annual return" in that it measures what the fixed annual rate of return of an investment would have been based on its total long-term return. For instance, a stock that grows 75 percent in three years would have an "average annual return" of 25 percent (75% divided by 3 = 25%), and a compound annual return (calculated through a complex formula) of about 20 percent. In other words, if an investment were to go up 20 percent each year for three years, through compounding, that would equal a total of a 75 percent return. (See average annual return.)

See: Compound Annual Growth Rate