We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is a Cumulative Return?

Malcolm Tatum
Updated: May 16, 2024

A cumulative return is the total amount of return generated by an investment within a specified time frame. This type of return allows for both gains and losses that are incurred during the period under consideration, and bases the final tally on difference in value from the beginning of that period to the last date of the same period. Typically, a cumulative return is presented as a percentage rather than a dollar amount.

There is some difference in exactly which factors are considered when determining the cumulative return on an investment. In some situations, any dividends earned are also included in the calculation. This is true even if the dividends are used for reinvestment in additional shares. At other times, the focus is on the actual increase or decrease in the price of each unit or share of the investment that is held for the entire time frame. Both methods are considered legitimate means of calculating this type of return. For this reason, it is important to identify which of the two formulas are employed in a given situation. Analysts sometimes preface the presentation of a cumulative return by defining the assumptions, or the specific process used to arrive at the figure.

Often, a cumulative return is annualized. That is, the period under consideration is normally either twelve consecutive months, or an actual calendar year. For example, the period may begin with 1 September of one year and conclude on 31 August of the following year. The time frame may also begin on 1 January and end on 31 December of the same year. When the cumulative return is annualized, it is sometimes referred to as a compound return, although there is some controversy over whether the two terms should be used interchangeably when referring to an annual period.

There are situations where investors will consider the cumulative return for a shorter period of time. It is not unusual for investors to look closely at the return generated during a given quarter, or for the first six months that an investment is held. This is helpful, in that the investor can get an idea of how well the investment is performing, and if that level of performance is within reasonable expectations. If so, then the investor will continue to hold on to the investment. Should the calculation of the cumulative return indicate the investment is not generating an equitable amount of return, it can be sold and the investor can seek out an opportunity that shows promise of earning a more attractive return.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.