What Is Cumulative return?
Cumulative return is the total change in the investment price over a set time, taking into account reinvested dividends or capital gains. It allows for investors to measure the performance of an investment over a certain period of time. It is is distinct from annualized return which measures the rate of return over a given period of time.
Cumulative return is calculated by taking the gain (or loss) of the investment over a certain time period and dividing it by the principal value of that investment. It can also be calculated using the standard returns of each period, where Rc = (1 + R1)(1 + R2) - 1.