Absolute Return is the gain or loss on an investment, expressed as a percentage of the amount invested. It is the return that the asset generates over a period of time. However, for the purpose of calculation of absolute return, the time period is not considered.
Example
Rahul invested Rs. 100 in a portfolio. The amount grew to Rs. 150 shortly. We can calculate profit/gain by taking a difference between the amount invested and the current value of the investment. We can calculate Absolute Return by calculating the gain/loss as a percentage of the amount invested.
Amount Invested = 100
Value of Investment = 150
Profit/Gain = 150 – 100 = 50
Absolute Return = Return % = Profit/Investment * 100 = 50/100 * 100 = 50%
Important Note: Past Performance may or may not be sustained in future.