The compound return is the rate of return, usually expressed as a percentage, that represents the cumulative effect that a series of gains or losses has on an original amount of capital over a period of time. Compounded Returns are usually expressed in annual terms, meaning that the percentage number that is reported represents the annualized rate at which capital has compounded over time.

For example, suppose you started with an initial investment of $1,000. If you multiply 1,000 by 1.1 five times, that is, $1,000 x (1.1)⁵, you will end up with about $1,611. If an investment of $1,000 ended up being worth $1,611 by the end of five years, the investment could be said to have generated a 10% annual compound return over that five-year period.