Rate Of Return

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What is a 'Rate Of Return'

A rate of return is 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.

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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RELATED FAQS
  1. What are some of the limitations of only looking at the rate of return for an investment?

    Learn why only reviewing the rate of return for an investment poses a risk to the investor and what additional factors should ... Read Answer >>
  2. How does a person gain from an investment?

    There are two main ways in which a person gains from an investment. The first is by capital gains, the difference between ... Read Answer >>
  3. What is the difference between capital gains and investment income?

    Learn about the difference between capital gains and other types of investment income, such as dividends paid on stock or ... Read Answer >>
  4. What can cause the rate of return to be negative?

    Learn how poor company or sector performance, economic turmoil and inflation can cause the rate of return on an investment ... Read Answer >>
  5. What is the difference between yield and rate of return?

    Read about the differences between yield and rate of return. See why many novice investors often struggle more with the concept ... Read Answer >>
  6. What is the lowest capitalization rate before an investment becomes unprofitable?

    Learn about different levels of profitability associated with investments featuring similar capitalization rates. Explore ... Read Answer >>
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