Rate of Return
Educational only, not financial advice.
Rate of return is the percentage gain or loss on an investment over a given period — the basic building block for measuring and comparing investment performance.
Why it matters
- A single year's rate of return can be misleading; long-run annualized returns give a fuller picture.
- Nominal rate of return doesn't account for inflation — see Real Return for the inflation-adjusted version.
- Comparing investments requires comparing returns over the same time period and risk level.
Simple example
- An investment that grows from $10,000 to $10,800 in a year has a 8% rate of return for that year.
- A 7% average annual rate of return over 20 years does not mean every year returned exactly 7% — some years were higher, some lower or negative.
How beginners use this
Compare investments with annualized rates such as CAGR. Try the CAGR calculator.
Related terms
Learn more
Try it
Sources
Reviewed by Greg Parsons. Links checked October 14, 2026. Educational only, not financial advice.