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Return on an annual basis What Is the Purpose of an Annual Return? The annual return on an investment is the rate of return that an investment generates over a certain period of time, expressed as a time-weighted yearly percentage. There are several other types of returns that can be generated, including dividends, capital gains, and capital appreciation. As measured against the initial amount of investment, the rate of annual return represents a geometric mean rather than a simple geometric mean of the investment's performance. Annual Return: What You Need to Know An annual return, also known as the de facto method for evaluating the performance of investments with liquidity in the financial markets, can be computed for a number of assets, including stocks, bonds, and mutual funds. bonds, mutual funds, commodities, and some forms of derivatives. This is the preferred technique, as it is believed to be more accurate than a simple return due to the inclusion of adjustments for com...