What does return mean?

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Financial lexicon Financial lexicon

The return on a financial investment is the premium we can get from our investment.

The return is usually expressed in percentage terms on an annual basis and is a measure of the income generated by the investment in relation to the capital invested and the duration of the transaction.

The definition may change depending on the financial asset to which it refers:

  • yield of a bond (also called 'coupon') is the price paid by the borrower of our money;
  • 'risk premium' in the case of investments in shares or investment funds.

In a proper investment, the return is directly proportional to the risk. Starting with a 'zero' risk yield (and by risk, in Italy, we mean three-month Treasury bonds) all yields greater than that zero risk yield will have a risk.

If everything doesn't go as planned, the return can be negative, and in that case, we will inevitably lose money.

To learn more about other performance-related concepts, we also recommend reading the following articles:

Remember that at any time, on MoneyController, you can calculate the performance of your portfolio thanks to the free tool we make available to you online.

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