Performance is not the same as return

📖 The story

A fund unit rose from $75 to $240 over 9 years. The salesperson advertises the big total gain – but customer Paula wants to know the real annual return.

ℹ Lump-sum investment, annual view.

Change any number and press "Calculate" – or use "Type in" on the right to watch it entered.

What you learn

Performance is not return: a high total rise sounds spectacular, yet the real annual return lies far below it because of compound interest. Always have the return named to you, not the performance.

In short: The true return computed with compounding lies far below the apparent average performance – customers should always be told the return.

Formula

i = (FV/K0)^(1/n) − 1

With the example numbers

i = (240/75)^1/9 − 1 = 13,80 %

How to read the formula

Extracting the return from the starting and ending value means taking the n-th root of the ratio: i = (FV/K₀)^(1/n) − 1. The root spreads the total gain evenly across all years – that is the true average return, not the naive total gain divided by the years.

Embed on your own website

iframe code to copy›

<iframe src="https://fintechcalc.mindcruce.com/example.php?e=performance-vs-rendite&embed=1" width="100%" height="720" style="border:1px solid #ddd;border-radius:12px" loading="lazy"></iframe>