Apologies if this has been asked before, I couldn't find it, or if this is so basic, but I feel it needs asking.

I'm sure we've all seen tables like this outlining fund performance.

enter image description here

What I'm unclear on is how to interpret those return values.

Say for example I put $100 in FundA, and it performs like this (extreme values to make my point clearer)

Year    Value of my account   Performance %
2010    $100
2011    $10                   -90%
2012    $20                   +100%
2013    $40                   +100%
2014    $80                   +100%    
2015    $100                  +25%

Would the "5 Year Return" advertised by a bank, in a table like the one above be:

a) 0% - because I started with $100 and ended with $100


b) 47% - the average of -90, 100, 100, 100, 25

I would expect and hope the answer is 'a', but... is it?

EDIT: Here's the advertised fund


and here's a Google Doc Sheet with the numbers, none of them match the advertised performance


  • That td link is generic. Which specific fund are you referring to?
    – RonJohn
    May 11, 2017 at 18:22
  • @RonJohn Sorry, it's TD Canadian Bond Index - eTDB909, choose "Mutual Funds" tab, then "Index Funds" in the now visible tab. Then "Performance" in the new tab.
    – Jim W
    May 11, 2017 at 18:25

2 Answers 2


Those are annualized returns not average annual returns. One formula for annualized return over a period (assuming continuous compounding) is

V1 - V0
-------  * e^(-T)

To convert to annual compounding you'd use:

 V1 - V0
--------- ^ (1/T) 

Where V1 is the ending value, V0 is the starting value, and T is the time frame in years. Since V1 - V0 = 0, the annualized return over 5 years using either method is 0%.


You know the answer, but wish it wasn't so.

EDIT: To get from $100 to $114.46 in 5 years is 3.434% compound growth. 100*1.34344. Since most stocks pay dividends, your account balance will not exactly reflect the growth in the price of the mutual fund.

  • I woke up in a cold sweat thinking maybe it was 'b' - that's true.
    – Jim W
    May 11, 2017 at 18:14

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