What is 'Estimated Long-Term Return'

Estimated long-term return is a hypothetical measure providing investors with an estimated expectation for the return they can expect over the life of an investment. It is most often quoted in investments with fixed income securities and a fixed duration.

BREAKING DOWN 'Estimated Long-Term Return'

Estimated long-term return is a metric that provides investors with a return estimate they can expect when investing in a fund over a long-term timeframe. This measure can be comparable to a savings account rate or the rate of interest quoted for a certificate of deposit. Generally, fund managers reporting estimated long-term return will be able to arrive at this calculation because the underlying fund investments have a specified return that is given at the time of initial investment.

Many fixed income funds may choose to disclose estimated long-term return in their registration documentation and marketing materials. Proposals have also been made to provide this information in the Form S-6, which is the registration statement filing for unit investment trusts, though no final rules have been dispersed.

Unit investment trusts, and specifically UIT portfolios with a high allocation to fixed income investments, can provide an ideal vehicle for estimated long-term return disclosure. These investments are one of three formal investment companies regulated by legislation from the Investment Company Act of 1940. These investments are created through a trust structure and issued with a fixed maturity date. In the fixed income realm these investments can be a good alternative to high yield savings accounts and certificates of deposit.

Overall, estimated long-term return disclosure can be a marketing measure easily quoted by fixed income funds that can increase marketability. Most funds will have a higher estimated long-term return than high yield savings accounts or certificates of deposit which can draw investors seeking low risk fixed income investments.

Return Calculation

The estimated long-term return is typically calculated as an annual percentage return over a specified timeframe. It is often presented net of estimated fees. In fixed income portfolios it can easily be based on the yields of all the underlying securities in a portfolio. In this case, it is usually weighted to account for each security's market value and maturity.

The estimated long-term return can be a helpful point of consideration when planning on investing in a fixed income product over the long-term. It can give a fairly accurate estimation of the return on the portfolio. It is also similar to the yield to maturity measure of a single bond extended to a portfolio, with some adjustments.

  1. Estimated Current Return

    The estimated current return is the expected return for a unit ...
  2. Gross Rate of Return

    Gross rate of return is the total rate of return on an investment ...
  3. Current Income

    Current income is associated with strategies that seek to identify ...
  4. Accounting Rate of Return (ARR)

    The accounting rate of return measures the amount of profit, ...
  5. Fixed Asset

    A fixed asset is a long-term tangible piece of property that ...
  6. Fixed Capital

    Fixed capital includes the assets - such as property, plant and ...
Related Articles
  1. Investing

    Projected Returns: Honing The Craft

    Find out how to forecast long-term returns on the three major asset classes.
  2. Investing

    Fixed Income Trader: Career Path & Qualifications

    Discover the career path the most fixed income traders follow and learn more about the qualifications needed and the average salary they earn.
  3. Managing Wealth

    Asset Allocation: The First Step Toward Profit

    Understanding the different asset classes is an essential part of portfolio diversification.
  4. Investing

    4 Benefits of Holding Stocks for the Long Term

    Discover some of the benefits that come from buying and holding stocks for longer periods of time, such as tax savings and risk minimization.
  5. Retirement

    How To Create a Retirement Portfolio Strategy

    Properly planned retirement portfolio strategies are needed for maximum profit, in this article find out the rules of retirement income planning.
  6. Investing

    Unit Investment Trusts Market: 3 Trends in 2016

    Learn more about unit investment trusts (UITs), and discover some of the most common trends in the UIT market to date in the year 2016.
  7. Managing Wealth

    How Will Your Investment Make Money?

    Discover the basic types of investment income and which asset classes pay them.
  8. Retirement

    Top 5 JPMorgan Funds for Retirement

    Discover five J.P. Morgan mutual funds that provide high returns and excellent diversification of retirement savings. Learn how to allocate assets properly.
  9. Investing

    How to calculate your investment return

    How much are your investments actually returning? The method of calculation can make a significant difference in your true rate of return.
  10. Investing

    The 4 Best BlackRock Mutual Funds for Your Roth IRA (BLK)

    Discover the four best mutual funds administered and managed by BlackRock that invest in a wide variety of fixed income and equity securities.
  1. What are the main advantages of fixed income securities?

    Learn why the addition of fixed income securities are common among investors who are attempting to limit their exposure to ... Read Answer >>
  2. What is the difference between yield and return?

    Return is the financial gain or loss on an investment. Yield measures the income, such as interest and dividends, from an ... Read Answer >>
  3. How do you account for changes in the market value of various fixed assets?

    Understand how to account for changes in the fair market value of a company's fixed assets. Learn what accounting methods ... Read Answer >>
  4. What is the difference between fixed cost and total fixed cost?

    Learn what a fixed cost is, what a variable cost is, what total fixed costs are, and the difference between a fixed cost ... Read Answer >>
Trading Center