What is 'Expected Return'
Expected return is the amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, if one invested in a stock that had a 50% chance of producing a 10% profit and a 50% chance of producing a 5% loss, the expected return would be 2.5% (0.5 * 0.1 + 0.5 * 0.05). It is important to note, however, that the expected return is usually based on historical data and is not guaranteed.
BREAKING DOWN 'Expected Return'
For the most part, the expected return is a tool used to determine whether or not an investment has a positive or negative average net outcome  it is not a hard and fast figure of profit or loss. In the example above, for instance, the 2.5% expected return cannot, in fact, be realized  it is merely an average.
In addition to expected return, wise investors should also consider the probability of return in order to properly assess risk. After all, one can find instances in which certain lotteries offer a positive expected return, despite the very low probability of realizing that return.

Mean Return
1. In securities analysis, it is the expected value, or mean, ... 
Abnormal Return
A term used to describe the returns generated by a given security ... 
Return
The gain or loss of a security in a particular period. The return ... 
Negative Return
This occurs when a company or business has a financial loss or ... 
Risk
The chance that an investment's actual return will be different ... 
Gross Rate Of Return
The total rate of return on an investment before the deduction ...

Fundamental Analysis
Explaining Expected Return
The expected return is a tool used to determine whether or not an investment has a positive or negative average net outcome. 
Fundamental Analysis
How To Calculate Your Investment Return
How much are your investments actually returning? Find out why the method of calculation matters. 
Mutual Funds & ETFs
What are Excess Returns?
Excess returns are investment returns that exceed a benchmark or index with similar risk. 
Investing Basics
Calculating Annualized Total Return
The annualized total return is the average return of an investment each year over a given time period. 
Investing Basics
Low Vs. HighRisk Investments For Beginners
Understanding risk is key to better investing. 
Investing
4 Benefits of Holding Stocks for the Long Term
Discover some of the benefits that come from buying and holding stocks for longer periods of time, such as tax savings and risk minimization. 
Fundamental Analysis
The Most Accurate Way To Gauge Returns: The Compound Annual Growth Rate
The compound annual growth rate, or CAGR for short, represents one of the most accurate ways to calculate and determine returns for individual assets, investment portfolios and anything that ... 
Term
What's a Real Rate of Return?
A real rate of return is an annual percentage investment return thatâ€™s adjusted for inflation, taxes or other factors. 
Term
What's a Return of Capital?
A return of capital is an investment return that is not considered income. 
Investing Basics
More Ways to Evaluate Portfolio Performance
The Jensen measure is another tool investors use to include risk when measuring portfolio performance.

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How can I use expected return with my risk profile to make an investment decision?
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How does the required rate of return affect the price of a stock, in terms of the ...
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What can cause the rate of return to be negative?
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How can I calculate the expected return of my portfolio?
Understand the components of the equation used to calculate the expected return of an investor's portfolio. Learn why the ... Read Answer >> 
What is the formula for calculating opportunity cost?
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