Nominal Rate Of Return


DEFINITION of 'Nominal Rate Of Return'

The amount of money generated by an investment before expenses such as taxes, investment fees and inflation are factored in. For example, detailed data on a mutual might show a fund's nominal rate of return as 10%, but also show its return after taxes on distributions and sale of fund shares is only 7%. Investors should look beyond an investment's nominal rate of return to get a true idea of what their investment will earn.

BREAKING DOWN 'Nominal Rate Of Return'

Municipal bonds, for example, generally have a lower nominal rate of return than corporate bonds, but the nominal return and the after-tax return of Munis is usually identical since Munis are usually tax exempt, whereas income earned from corporate bonds will be subject to taxation. Corporate bonds are also subject to tax on capital gains when they are sold, giving them an actual rate of return that may be significantly lower than their nominal rate of return.

  1. Internal Rate Of Return - IRR

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  2. Gross Rate Of Return

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  3. Risk-Free Rate Of Return

    The theoretical rate of return of an investment with zero risk. ...
  4. Time-Weighted Rate of Return

    A measure of the compound rate of growth in a portfolio. Because ...
  5. Rate Of Return

    The gain or loss on an investment over a specified period, expressed ...
  6. Percentage Change

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