Rate of Return on a Portfolio

The rate of return on a portfolio measures the percentage change in the value of a portfolio over a specific period, accounting for both capital gains and income from dividends or interest. It is a key metric for evaluating the performance of an investment portfolio. The rate of return can be calculated using various methods, such as the time-weighted or money-weighted return, depending on whether or not cash flows (e.g., deposits or withdrawals) are considered.

Example

An investor’s portfolio grows from $100,000 to $110,000 in a year, resulting in a 10% rate of return, which includes capital appreciation and dividends.