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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Annual Return

Definition:

Annual return is simply what you get back from your investment each year. It's the whole enchilada of what your investment makes you (or costs you), including capital gains or losses and interest or dividends. It doesn't include stuff like taxes and commissions.

If you're trying to compare different investments or trying to decide whether you want to invest in a specific stock or investment, you're probably going to be looking closely at the annual return to figure out what's what.

Example

You owned Smooshem Ketchup Company last year on January 1. The stock traded at $50 a share. By New Year's Eve, the stock was trading for $55. But it also paid $2 in dividends through the year. Its annual return, in simple terms (i.e., not worrying about the time value of dividends paid at different times of the year) was $7 total from a base of $50 or 7 / 50 = 14%.