Published data on past returns earned by mutual funds are required to be geometric returns.
What is geometric return?
- The geometric mean, which is calculated to determine the performance outcomes of an investment or portfolio, is the average of a set of items.
- The phrase "the nth root product of n numbers" is how it is officially defined. When dealing with percentages that are produced by values, as opposed to the values themselves, the standard arithmetic mean must be applied.
- The geometric mean is the average rate of return of a collection of values derived using the products of the terms.
It is also known as the compounded annual growth rate or time-weighted rate of return. Geometric mean multiplies a number of numbers and raises them to the 1/nth power.
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