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8. Managing Your Portfolio > Calculate Investment Return Over Different Time Pe...

Calculate Investment Return Over Different Time Periods

By calculating the compound annual return you earned over different lengths of time, you can determine your portfolio performance.

If you own mutual funds, you’re probably familiar with returns calculated for different periods. Mutual funds typically publish their returns [Hack #63] for the most recent one-year, three-year, five-year, and ten-year compound annual returns, and will publish their compound annual return since the inception of the fund if it has existed for longer than ten years. For mutual funds, the long-term returns are more important, because funds can run hot and cold in shorter periods. Individual investors and investment clubs can also use compound annual return calculations to see how they’re doing. However, you must understand internal rate of return calculations to evaluate your performance in a meaningful way.


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