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.
INVESTOPEDIA EXPLAINS '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.
VIDEO
Loading the player...
RELATED TERMS

Compound Net Annual Rate  CNAR
The return on an investment after taking tax implications into ... 
Pretax Rate Of Return
The rate of return on an investment that does not take the taxes ... 
Nominal Rate Of Return
The amount of money generated by an investment before expenses ... 
Expected Return
The amount one would anticipate receiving on an investment that ... 
Real Rate Of Return
The annual percentage return realized on an investment, which ... 
Required Rate Of Return  RRR
The minimum annual percentage earned by an investment that will ...
RELATED FAQS

What are some of the limitations of only looking at the rate of return for an investment?
Analyzing investment performance over a specific time frame is a tool commonly used by investors to compare investments opportunities ... Read Full Answer >> 
How can I calculate the value of a stock as per the Gordon Grown Model, using Excel?
The Gordon growth model, or the dividend discount model, is a model used to calculate the intrinsic value of a stock based ... Read Full Answer >>
Related Articles

Investing Basics
What's the Rate of Return?
Rate of return is the earnings an asset generates in excess of its initial cost. The amount is usually expressed as an annualized percentage rate. Rate of return can be calculated based on the ... 
Credit & Loans
Credit Card Arbitrage: Free Money Or Dangerous Gamble?
Credit card arbitrage is a way to make some money, but it's a major gamble with devastating risks. 
Retirement
Protecting Your Retirement Assets
Your golden years are meant to be stress free. Keep them that way by protecting your assets. 
Home & Auto
Choose Your Monthly Mortgage Payments
Exotic mortgages allow you to decide how much to pay. Find out how much they really cost. 
Economics
How Return On Equity Can Help You Find Profitable Stocks
It pays to invest in companies that generate profits more efficiently than their rivals. This is where ROE comes in. 
Retirement
5 RetirementWrecking Moves
These common mistakes can sabotage your nest egg and your plans for retiring. 
Retirement
The 401(k) Investor: A Retirement Plan That Works
"Save as much as I can" isn't going to cut it. You need an effective approach to make sure your retirement nest egg doesn't fall short. 
Fundamental Analysis
The Capital Asset Pricing Model: An Overview
CAPM helps you determine what return you deserve for putting your money at risk. 
Budgeting
Use ROA To Gauge A Company's Profits
Do you rely too heavily on ROE? Consider using return on assets for a more complete picture. 
Fundamental Analysis
Gauge Portfolio Performance By Measuring Returns
Calculate returns frequently and accurately to ensure that you're meeting your investing goals.