Realized return

Definition

Realized return is the actual gain or loss an investor experiences on an investment over a specific period. It includes income from interest or dividends plus any capital gains or losses realized during the holding period.

5 Must Know Facts For Your Next Test

1. Realized return accounts for both income received and changes in asset value.
2. It is different from expected return, which is based on projections and estimates.
3. Realized return can be calculated using historical data of price changes and income received.
4. It is a critical measure for assessing the performance of individual assets.
5. Investors use realized returns to evaluate past investment decisions and adjust future strategies.

Review Questions

• What components are included in calculating realized return?
• How does realized return differ from expected return?
• Why is realized return important for evaluating investment performance?

Related terms

Capital Gain: The profit earned from selling an asset at a higher price than its purchase price.

Dividend Yield: A financial ratio that shows how much a company pays out in dividends each year relative to its share price.

Expected Return: The anticipated value of returns on an investment, based on historical data and probability models.