Investors are more likely to see a compound return than a cumulative return, as the compound return figure will be annualized. This helps investors to compare different investment choices.
A common way to present the "effect" of a mutual fund's performance over time is to show the cumulative return with a visual such as a mountain graph.
Investors should check to confirm whether interest and/or dividends are included in the cumulative return; such payouts may be assumed to be re-invested or simply counted as raw dollars when calculating the cumulative return. Any marketing material for a mutual fund or similar investment should state any assumptions clearly when presenting such performance data.
Investment dictionary. Academic. 2012.
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