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Annual Return

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The annual return of an investment is the amount gained or lost over a calender year. An annual return is often quoted as a percentage. A gain of $120 on a $1000 investment, for example, can be expressed as an annual return of 12%. Mutual funds often quote an annual return in their advertising literature. For funds, the annual return reported assumes reinvestment of dividends and capital distributions. It also accounts for most fund expenses, including 12b-1 fees. Sales fees, however, are not included. For example, the annual return reported by a back-loaded mutual fund would not include the deferred-sales charge. For bonds and other debt instruments, the annual return quoted at the time of sale is only valid if the bond is held to maturity.



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