Annualized Returns are computed after taking average of yearly returns for a number of years. These returns may include dividends, capital appreciation, as well as returns of capital. When computing annual returns, it has to be kept in mind that these returns are measured as a geometric mean instead of an arithmetic mean. This measure is used for determining the performance of a investment with liquidity. The important thing to note is that not all the annualized returns have similar strata it is different for different kind of asset classes.