# What is it – and how do I calculate it?

**The return is the most important decision criterion for an investment. Because it shows you how much you can achieve with an investment. But how do I calculate it? And what do I have to watch out for?**

If you want to invest money, you will inevitably come across the concept of return. What is meant by that **Yield**that you achieve through an investment – and therefore next to that **risk **the most important decision criterion for an investment.

But how does the risk relate to the return? Isn’t the rate of return ultimately the interest rate? And how can I calculate the return?

### What exactly is a return?

A return is the return on an investment. As a rule, it is given in percent and calculated on a yearly basis. Often you will also find the information “p.a.” for a possible return, which stands for “per annum”.

Note: You can only reliably calculate the return afterwards, i.e. when you have invested money and made a possible profit (see below). So you only get one when you invest **Return forecast **specified – which does not have to apply. Because nobody can make precise predictions about the development of an investment.

There are different types of returns: As with wages, a basic distinction is made between gross and net returns. The **Gross return **An investment is the return – without taxes or other costs being excluded. The **Net return **on the other hand, is the return that remains after the costs have already been deducted.

In addition, the return can still be differentiated based on its origin, and some of the terms also overlap. For example, there are the following types:

**Return on savings:**Here, the return comes from the interest rate that a bank gives you into a day or time deposit account.**Return on shares**: The return on shares, i.e. company shares, is largely composed of the price gains of a share.**Dividend yield**: This stems from the amount of dividends an investor is entitled to hold a security. A dividend is part of the corporate profit that stock companies distribute to their investors.**Bond yield**: A bond is basically a personal loan to a company or the state. The company or the state pays you an interest for lending them money. This and other factors such as the remaining term or the current price of a bond influence the yield.**Property return**: It consists of renting or selling one Real estate, so the increase in value together.

**Basically**: All possible returns also depend on the costs – which differ greatly from investment to investment.

### Is a return the same as an interest?

No – at least not necessarily. Interest income is always a return, but there are also returns that are not due to interest, for example dividend yields (see above).

You receive interest, for example, when you invest money using a overnight or fixed deposit account – or when you lend money to the state or a company in the form of a so-called bond (see above).

The return is then the amount that you actually get from an investment, i.e. ultimately the **actual interest** an investment. Because your return does not only depend on the interest rate – but also on other factors such as the price development (for bonds, stocks or funds) or costs.

### How can I calculate the return?

The **Gross return **An investment (see above) is calculated from the money invested and the total amount of an investment.

The basic **formula **reads as follows:**[(Gesamtbetrag am Ende des Investments / eingesetztes Geld) – 1] x 100 = gross return in percent.**

A **example **for clarification:

You have invested 8,000 euros. After one year you got 8,590 euros. So your gross return is [(8.590 Euro / 8.000 Euro) – 1] x 100 = 7.375 percent p.a.

There are various formulas for calculating returns for the individual investment types (see above). The best way to calculate a return is to use a return calculator on the Internet.

The **Net return **is calculated similarly to the gross return, except that the costs have to be deducted here. The standard formula is as follows:**[(Gesamtbetrag – Kosten / eingesetztes Geld) – 1] x 100 = net return in percent**

Here too – depending on the type of costs – the formulas may differ. You can also find return calculators on various websites.

### Are returns and security mutually exclusive?

Basically, the higher a possible one **Return** – or rather the return forecast – the higher the risk of loss. You should always keep this in mind when investing – and make a balance between return and risk.

If you invest in individual stocks, you can also achieve a higher return than with an equity fund that spreads the risk widely, but is usually also quite expensive. However, individual stocks are much more likely to lose your money – because the risk is not shared.

In contrast, the savings book is considered a very low-risk investment. But the rate of return you can get is currently very low due to the low interest rates.

The investment therefore offers the best possible mix of risk and return in so-called ETFs, also called index funds. Here, a computer algorithm replicates an entire stock index, such as the Dax. So you benefit from the rising prices of many companies – and the costs are low.