Return
BeginnerReturn is the gain or loss made on an investment over a period of time. It includes both any income received and any change in the investment's value.
Return answers a simple question: how much did this investment earn or lose? It has two parts. Income return is the cash an investment pays while you hold it, such as interest, dividends or rent. Capital return is the change in the investment's price.
Suppose you buy shares for 2,000. Over a year, you receive 60 in dividends, and the shares rise in value to 2,200. Your total return is 260: 60 from dividends plus 200 from the price rise. As a percentage of the 2,000 invested, that is a 13% return.
Returns can be negative. If the same shares fell to 1,800, your total return would be 60 minus 200, a loss of 140, or −7%.
It is important to know what a return figure includes. Some figures ignore dividends, some ignore fees and taxes, and some ignore inflation. A 7% return in a year when prices rose by 4% is a real gain of only about 3%. Comparing returns fairly means comparing like with like, over the same period.
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