What does return mean?

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Financial lexicon Financial lexicon

The return on a financial investment, which is usually expressed as a percentage on an annual basis, represents a measure of the return generated by the investment in relation to the capital invested and the duration of the business. In other words, it is the premium we can get from our investment.

The definition of return can also be given in terms of the financial asset to which it relates: the return or yield on a bond, also called a “coupon”, is the price we pay to the person whom we lend our money; it can also take the form of a “risk premium” for investments in stocks or mutual funds.

With a “correct” investment, the return is directly related to the risk. Based on the zero-risk return, there is a risk for all returns that are higher than the zero-risk return.

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

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