Absolute return is the return that an asset gains over a certain period of time. Absolute return measure the gain or loss that an asset achieves over a given period of time. The asset could be Mutual Funds, stocks, etc. Absolute return is expressed in percentage.
Absolute return can also refer to the Total Return of a portfolio or fund, as opposed to its relative return against a benchmark. It is called relative because many mutual fund scheme's performance is benchmarked against an index.
The formula for absolute return is-
Absolute returns = 100* (Selling Price – Cost Price)/ (Cost Price)
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For an illustration purpose, let's take an example. Let's suppose that you have invested in a asset on January 2015 at a price of INR 12,000. You sold the investment in January 2018 at the cost of INR 4,200.
Absolute returns in this case will be:
Absolute returns= 100* (4200 – 12000)/12000 = 65 percent