investment return

Expected investment return is one of the most important investment criteria for most investors.

However, one should always look at risk adjusted rates of return for investments.

Investment risk is commonly measured as the expected variance of the investment returns.

The expectations for investment profitability are usually based on either

• historical returns
• historical returns of comparable investment instruments

There are, however, many additional ways to predict future returns apart from looking at historical returns of the investment.

Some investment houses, for example, model expected returns for stocks based on derivate models from several variables, including macroeconomic and peer group variables.

Investment Measurements and Return - Basics

Whatever way one looks at investment returns, there is usually one thing in common for investment returns from investors perspective: investors want more expected return to compensate for more investment risk.

However, modern academic behavioral investing research suggests that this relationship does not always happen in real life, based on human behavior.

The good thing about researching expected returns is that for the most common types of investments, they are available from several sources.

For example, for the most popular stocks, there are a lot of analysts giving their opinions as to what the expected returns on the stock are.

The same applies to expected returns on forex, popular derivatives, and some types of real estate investments as well.

Many sources, such as Financial Times, also publish past returns for several types of investments, which you may or may not use to influence your investment decisions.


Risk Disclosure and Terms of Use


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