Finance
Fact-checked

At WiseGEEK, we're committed to delivering accurate, trustworthy information. Our expert-authored content is rigorously fact-checked and sourced from credible authorities. Discover how we uphold the highest standards in providing you with reliable knowledge.

Learn more...

What Is an Actual Return?

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum

An actual return is a figure that represents the overall gain or loss that an investor experiences from the ownership of stocks, bonds, or other types of investments. The figure takes into consideration a number of factors, including the cost of owning and maintaining the asset, acquisition costs and any fluctuations in market prices that have occurred. The idea behind calculating the actual return is to compare the real monetary benefit of owing the asset versus the expected returns at the time of purchase, and how the profits compare to the average return on similar assets.

Several factors go into the determination of an actual return. In order to manage the process, it is important to identify all costs associated with the purchase of the asset. This includes not only the purchase price but also any closing costs, brokerage fees, clearing fees and any other expenses that were incurred during the process of buying the investment. This figure will form the basis for eventually identifying the actual return.

Man climbing a rope
Man climbing a rope

Along with the costs incurred at the time of the purchase, it is also necessary to identify any expenses that have to do with the ownership of the asset since that date. This may include expenses such as insurance coverage, or any losses generated by the upward or downward movement of the investment’s value in the marketplace. These amounts can be added to the other expenses, arriving at the total cost of ownership.

With all expenses accounted for, the next step in determining actual return is to consider the benefits that have been received from owning the asset. This may be in the form of increasing stock prices, dividends that have been received over time, or even appreciation in terms of the current market price. Totaling those benefits and deducting them from the overall expenses will allow the investor to see if the asset is moving toward profitability at an acceptable rate or if any real profits have already been received.

Comparing the actual return with the anticipated or expected return can help investors decide if they should continue to hold onto a given asset, or if the potential of the asset has decreased and selling it would be in the best interests of the owner. While any asset will take some time to generate enough return to offset the purchase price as well as the ongoing maintenance, the goal is to make sure that those returns are within the anticipated range and that ultimately the asset will produce the level of return desired. Since shifts in the market can impact the earning capacity of any asset, taking the time to calculate the actual return on at least an annual basis is a good idea.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including WiseGEEK, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

Learn more...
Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including WiseGEEK, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

Learn more...

Discuss this Article

Post your comments
Login:
Forgot password?
Register:
    • Man climbing a rope
      Man climbing a rope