Gross Rate of Return

What is Gross Rate of Return?

Gross Rate of Return represents the return of investment before all the possible expenses and fees in a certain period of time. This rate is mostly used in calculating the return on Investing in marketing. It can differ from the rate of return realized after the expenses (gross profit rate). The gross rate of return on an investment is one measure of an investor’s profit. It typically includes Capital gains and any Income received from the investment.

The gross rate of return on an investment can be substantially different than the rate of return that is realized after expenses. For example, the gross return realized on a Mutual Fund that charges a 4.25 percent sales charge will be very different than the return realized after the charge has been deducted. Mutual Fund Houses are therefore required to publish or provide both returns to investors for this reason.

Gross rate of return is the total rate of return on an investment before the Deduction of any fees or expenses. The gross rate of return is quoted over a specific period of time, such as a month, quarter or year.

Gross Rate of Return Formula

A simple calculation of gross return can be derived from the following equation:

Gross Rate of Return = (Final Value – Initial Value) / Initial Value