If you invest at different times, as most
people do, you also need to know your investments' annual
percent return to measure one performance against another. To
find that figure, you divide the total return from the date of
purchase by the amount you invested, to calculate the percentage
return. Then you divide the percentage return by the number of
years you owned the investment. If you invested $10,000 three
years ago, and the total return to date is $2,650, your annualized
percent return is 8.83 ($2,650 ÷ $10,000 = 0.2649 ÷
3 = 0.0883).
When you buy and sell also affects your return.
If you buy a stock just before its price jumps, the total return
will be stronger than if you bought after the price stabilized
or before it began to drop. That's one reason your results
on a mutual fund investment may be different from the total return
reported for that fund in the financial press or in fund materials.
Taxes also affect return. The total return
on a municipal bond may be lower than the total return on a corporate
bond, but if you owe no tax on the municipal bond income, it may
end up making you more money.
