Average Annual Return - AAR

A way to look at how well an investment has performed over a period of several years. As the name suggests, you just take the annual returns for a given period of time and figure out the average.

For instance, in the last half dozen years, the NASDAQ has returned +3% then -12%, then +22%, then +9%, then +15%, then -2%. The AVERAGE of these annual returns is about +5.8%. That's it. No calculus needed. Just a little addition and then a little division. You know, an average.