Average Annual Return

Definition

The average annual return is geometric mean return of the strategy since the beginning of the dataset. It is the primary method of gauging long-term performance.

Asset 9@2x

This represents the compound growth rate of the strategy. A high average annual return is desirable but investors should be aware of a highly volatile strategy, as they may not be able to cope with the emotional rollercoaster. The Sharpe ratio is a performance metric which includes both return and volatility.