StashLearn
Get the app
Get the app

Join millions of investors on Stash

Investing, simplified

Start today with as little as $5
Get the app
Teach Me

What’s a Return? An Investment Term Worth Coming Back To

March 16, 2017
return on investment

  • A return is your answer to the question, “What’s in it for me?”
  • Return can be expressed as dollars or as a percentage
2 min read

So, you’ve taken a big step in your financial life and invested some of your money. Congratulations! Eventually, however, you’ll want it back—and then some. That’s what we mean when we use the term “return” in relation to investing.

What’s a return?

A return is what you get out of your investment. If you’re thinking of investing and wondering what’s in it for me, the answer is a return on your investment.

You can see a “return” in other areas of your life, too. For example, when you exercise or follow a strict diet, you see a return in the form of bigger muscles and lower levels of body fat. Likewise, if you earn a college degree or learn a trade, your return potentially arrives in the form of additional career opportunities and job offers.

But when it comes to your finances and investments, here are some key things to remember about returns:

How your return is calculated and distributed

Returns are doled out in various ways, but generally, they hit your account as a dividend or interest payment, or a capital gains distribution. You also see a return when the price of one of your assets changes—if you bought a stock for $1, for example, and its price increases to $2, your return on that stock is $1, or 100%.

If the price goes down, on the other hand, to $0.50, your return would be -$0.50, or -50%—remember, a return can be both positive and negative.

Here are three equations to help calculate your return:

Dividends, interest and capital gains

A price change is fairly easy to understand. But what about capital gains and dividends?

A dividend is your cut of a company’s earnings. If you own shares in a company, you get a slice of the pie in the form of a cash payout.

Interest payments are generally paid to holders of bonds and other fixed-income securities. Bondholders are due interest payments, as they’re holding debt. Like a dividend, an interest payment typically takes the form of a cash payout.

Finally, capital gains distributions occur when a stock or bond held in a fund (like an ETF) is sold at a profit. The profit is divvied up and paid to shareholders, just like a dividend.

If you’re using Stash, however, you don’t need to worry about these pesky calculations—the app will do all the work for you.

Investing, simplified

Start today with as little as $5

Get the App

By Sam Becker

Next for you
Investment Risk: What It Is and How to Manage It

Investment Profile

Bonds Worldwide

An International Bond ETF on Stash

Learn more
Explore more articlesChoose a topic to learn more about
Careers Retirement market news budgeting social media
Disclaimers

Additional Disclosure:  Holdings and performance are hypothetical and provided for information purposes only.

This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Before investing, please carefully consider your willingness to take on risk and your financial ability to afford investment losses when deciding how much individual security exposure to have in your investment portfolio.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit www.stashinvest.com/disclosures.