To help you understand a fund’s historic performance,
fund companies often present both cumulative and average
annual returns in their profiles. So
how do you know which one has more significance to retirement investing?
Cumulative returns show the total returns, assuming that all earnings are reinvested in the fund and compounded over time. If you want to know how much an investment would have earned during a specific time period, cumulative returns can be useful.
However, if you want to compare the performance of a fund against its benchmark or other similar funds, average annual returns present a clearer picture of a fund’s track record by taking compound earnings out of the picture. Average annual returns make it easier for investors to compare two different funds’ performances side by side during the same time periods.
Need to know more? Contact Naperville Investment Services provider, Susan S. Lewis, she helps you keep more of your hard earned money.
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