Compound return
Return earned on principal plus prior-period gains.
Plain languagePractical exampleConnected reading
01
What is it?
Return earned on principal plus prior-period gains.
02
Why does it matter?
It helps compare maturities and reinvestment choices on a common basis.
03
How should it be read?
State period count, reinvestment rate, tax and fee assumptions.
04
Common mistake
Treating a simple annual rate as identical to a compounded outcome.
A simple example
A 2% monthly return reinvested for 12 months compounds to about 26.8% gross.