The process of adjusting performance or return which has been made over a period of less than or more than a year so that it can be compared with the annual results of other entities. For example, if a certain share gives a return of 25% over a period of six months this would be annualised to 50% per annum. Similarly, a return of 12% over 18 months would be annualised down to 8% per annum. Annualising enables us to compare different types of investment – like comparing the performance of a share with that of a bond, commodity or even a property. The process is simple – just add the capital gain (if there is one) to the income earned (such as the dividend, interest or rent) and express it as a “per annum” figure for comparison. Using this method you will find that listed equity shares usually out-perform all other types of investments over the long term.

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