Rate Of Return

AAA

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
  1. Compound Net Annual Rate - CNAR

    The return on an investment after taking tax implications into ...
  2. Pretax Rate Of Return

    The rate of return on an investment that does not take the taxes ...
  3. Nominal Rate Of Return

    The amount of money generated by an investment before expenses ...
  4. Expected Return

    The amount one would anticipate receiving on an investment that ...
  5. Real Rate Of Return

    The annual percentage return realized on an investment, which ...
  6. Required Rate Of Return - RRR

    The minimum annual percentage earned by an investment that will ...
RELATED FAQS
  1. 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 >>
  2. 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
  1. 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 ...
  2. 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.
  3. Retirement

    Protecting Your Retirement Assets

    Your golden years are meant to be stress free. Keep them that way by protecting your assets.
  4. Home & Auto

    Choose Your Monthly Mortgage Payments

    Exotic mortgages allow you to decide how much to pay. Find out how much they really cost.
  5. 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.
  6. Retirement

    5 Retirement-Wrecking Moves

    These common mistakes can sabotage your nest egg and your plans for retiring.
  7. 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.
  8. Fundamental Analysis

    The Capital Asset Pricing Model: An Overview

    CAPM helps you determine what return you deserve for putting your money at risk.
  9. 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.
  10. Fundamental Analysis

    Gauge Portfolio Performance By Measuring Returns

    Calculate returns frequently and accurately to ensure that you're meeting your investing goals.

You May Also Like

Hot Definitions
  1. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  2. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  3. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  4. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  5. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
Trading Center