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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Annualized Total Return

Definition:

An annual return is what you make from your investment each year. But what happens if you own your stock or investment for a whole bunch of years? You can figure out the Annualized Total Return, which is the geometric average of your investment's returns.

One problem: this method of evaluating returns misses the volatility of the investment. Did it double and then get cut 80% and then go up a lot at the end of the year? Or was it Milwaukee Ski Slope-flat and nicely boring during the year? Unless you like the taste of Pepto-Bismol and bitter tears, you probably prefer the latter, slightly less dramatic option.