DEFINITION of 'Rate Of Return'
The gain or loss on an investment over a specified period, expressed as a percentage increase over the initial investment cost. Gains on investments are considered to be any income received from the security plus realized capital gains.
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BREAKING DOWN 'Rate Of Return'
A rate of return measurement can be used to measure virtually any investment vehicle, from real estate to bonds and stocks to fine art, provided the asset is purchased at one point in time and then produces cash flow at some time in the future. Financial securities are commonly judged based on their past rates of return, which can be compared against assets of the same type to determine which investments are the most attractive.
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