Want to know how much your investment has actually earned? Annual Percentage Rate, let's take a look.

Many people only pay attention to short-term fluctuations, but this can easily lead to being deceived. What should be considered for long-term investment is the **Annual Percentage Rate**.

Calculate it in three simple steps:
1️⃣ Total return = ( current money - initial investment ) ÷ initial investment
2️⃣ Calculate the reciprocal of the number of years = 1 ÷ holding years
3️⃣ Annual Percentage Rate = ( total return + 1)^ reciprocal of years - 1

For example: 10 years ago, if you invested 10,000 in Microsoft, it would be 23,800 now. The total return is 138%, and the Annual Percentage Rate is 9.06%.

Why look at the annualized return? Because Microsoft has had terrifying volatility over the past ten years - losing 43.8% in 2008 and gaining 53.4% in 2009. Looking at the return for just one year is like gambling. Only the Annual Percentage Rate can truly reflect the actual effect of long-term investment.

Long-term investment looks at the Annual Percentage Rate, while short-term performance is just noise.