What is the cumulative return?

cumulative return is the total amount of return generated by investment in a specified time frame. This type of return allows both the profits and the losses that occur during the considered period and establish the final sum, unlike the value from the beginning of this period to the last date of the same period. Usually, the cumulative yield is presented as a percentage rather than the amount of the dollar.

There is a certain difference in which facts are considered in determining the cumulative return on investment. In some situations, any dividends acquired are also included in the calculation. This is true, although dividends are used for reinvestics in other shares. Other times, it focuses on the actual increase or decrease in the price of each unit or the share of the investment that is held throughout the time frame. Both methods are considered to be legitimate means of calculating this type of return. For this reason, it is important to identify which of these two formulas are used in the situation. Analysty predict the presentation of a cumulative return by defining the assumptions or a specific process used to achieve a picture.

Often the cumulative return is annualized. This means that the period considered is usually either twelve consecutive months or a real calendar year. For example, the period may begin on September 1 year and closes 31. August of the following year. The time frame may also begin on January 1 and end 31 December of the same year. If the cumulative yield is analized, it is sometimes referred to as a compound yield, although there is a certain controversy about whether these two conditions should be used interchangeably in the reference to the season.

There are situations where investors will consider a cumulative return for a shorter period of time. It is not uncommon for investors to look carefully for a return generated in a given quarter or for the first six months to be held investmentICE. This is useful in that the investor can get an idea of ​​how well the investment is doing and whether this level of performance is in reasonable expectations. If so, then the investor will continue to stick to the investment. If the calculation of the cumulative return suggests that the investment does not generate a fair return, it can be sold and an investor can seek an opportunity that shows a promise that it will gain more attractive return.