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.

Return
The gain or loss of a security in a particular period. The return ... 
Mean Return
1. In securities analysis, it is the expected value, or mean, ... 
Accounting Rate of Return  ARR
The amount of profit, or return, that an individual can expect ... 
Abnormal Return
A term used to describe the returns generated by a given security ... 
Negative Return
This occurs when a company or business has a financial loss or ... 
Target Return
A pricing model that prices a business based on what an investor ...

Investing
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. 
Investing
How To Calculate Your Investment Return
How much are your investments actually returning? Find out why the method of calculation matters. 
ETFs & Mutual Funds
What are Excess Returns?
Excess returns are investment returns that exceed a benchmark or index with similar risk. 
Investing
Calculating Annualized Total Return
The annualized total return is the average return of an investment each year over a given time period. 
Retirement
Can Your Retirement Portfolio Rely on High Rates of Return?
Some experts speculate that stock market returns may be headed downward and investors should strategize accordingly. But are they right? 
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. 
Markets
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 ... 
Markets
What's a Return of Capital?
A return of capital is an investment return that is not considered income. 
Markets
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. 
Managing Wealth
More Ways to Evaluate Portfolio Performance
The Jensen measure is another tool investors use to include risk when measuring portfolio performance.

How is the expected market return determined when calculating market risk premium?
Find out how the expected market return rate is determined when calculating market risk premium and how these figures are ... Read Answer >> 
What's the difference between absolute and relative return?
Knowing whether a fund manager or broker is doing a good job can be a challenge for some investors. It's difficult to define ... Read Answer >> 
How can I use expected return with my risk profile to make an investment decision?
Understand the basic concepts of expected returns, risk tolerance and riskadjusted returns, and how investors use these ... Read Answer >> 
What is the difference between a company's annual return and its annualized return?
Understand the importance of calculating a company's annual return and its annualized return, and learn the differences between ... Read Answer >> 
What annual return could an investor expect on average from the telecommunications ...
Learn what annual return an investor can expect on average from the telecommunications sector and which factors influence ... Read Answer >> 
How does the required rate of return affect the price of a stock, in terms of the ...
First, a quick review: the required rate of return is defined as the return, expressed as a percentage, that an investor ... Read Answer >>