Returns and compounding
Price return, total return, and the effect of reinvestment.
Returns and compounding
| Concept | Explanation | |---|---| | Price return | Change in market price over the measurement period. | | Income return | Dividends, interest, staking rewards, or other distributions. | | Total return | Price return plus income and distributions. | | Real return | Return after adjusting for inflation. | | Annualized return | Return converted to an average yearly rate. | | Compound return | Growth in which prior gains or income also generate future gains. |
Compounding is powerful, but losses also compound asymmetrically. A 50% decline requires a 100% gain to recover to the starting value.