Yearly Rate Of Return Method

Just see Annualize and be done with it.

Basically, the YRRM takes an annual view of investment returns. The magic phrase: New minus old over old.

So...if you invested in a stock at 10 bucks a share just after the ball dropped on New Year's Eve, and it closed the following year at $12.24, then your yearly return would have been 22.4%. Had you instead sold it when it kissed $15.00 on June 30 of that year, you'd have had an annualized 100% return on the stock, because it returned 50% at the midpoint of the year.

Why do investors worry about this term? It helps compare one set of returns with, say, that of the overall stock market. Or versus cash. Or bonds. Or some wild-haired hedge fund with huge fees. Placing everything on the 'yearly' grid gets everyone more or less on the same page, and that's important when your balls are dropping on New Year's Eve. Manhattan is usually freezing by then.