Annualised Return vs Absolute Return
Absolute Return simply tells you how much your investment grew from start to finish. If you bought land for ₹10 Lakh and sold it for ₹20 Lakh, your absolute return is 100%.
However, Annualised Return factors in time. Doubling your money in 3 years is fantastic (26% annualised return). Doubling your money in 15 years is mediocre (4.7% annualised return). Annualising returns allows you to compare different assets like Real Estate, FDs, and Stocks on a level playing field.
Intelligence Insight: A common mistake investors make is bragging about 100% or 200% returns in real estate without factoring in the holding period. An asset that goes up 200% over 20 years has only yielded a ~5.6% annualised return.