Average Annual Return - AAR

A figure used when reporting the historical return of a mutual fund. The AAR is stated after expenses have been tallied, including administration fees, 12b-1 fees, and others.

When you are selecting a mutual fund be careful not to depend too much on the AAR as it can be artificially inflated. For example, a fund can be down 30% in the first year, and up 30% in year two, giving an AAR of 0%. But if you had invested $1,000 in the fund, you'd have $700 after year one and $975 (750*1.30) after year two, hardly a 0% return