what are the limitations of an annualized rate of return 
annualized rate of return can be a useful tool to understand your investment outlook but it is not a guarantee market volatility and other outside forces can change an investment s annualized rate of return the bottom lineannualized rate of return calculates return on investment as an annual average over a given period of time investors can use the annualized rate of return to compare diverse investments over the same set period annualized rate of return can change over time influenced by market conditions 