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expected return

Expected return is a financial concept that represents the anticipated average return of an investment over time. It’s calculated by taking all possible returns, each multiplied by the likelihood of it occurring, and summing these values. Essentially, it gives investors an idea of what they might gain or lose from an investment, helping them make informed decisions. Remember, it reflects averages and probabilities, not guarantees, so actual returns can vary significantly from the expected outcome. Understanding expected return helps in assessing the potential risk and reward of different investment opportunities.

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    Expected return is a financial concept that represents the average return an investor might anticipate from an investment over a specific period, considering various possible outcomes and their probabilities. It combines potential gains and losses, weighted by how likely each outcome is to occur. For example, if an investment has a 70% chance of earning 10% and a 30% chance of losing 5%, the expected return would reflect these probabilities, giving a clearer picture of the investment's potential performance rather than focusing on a single possible result.