Wise investors calculate the return they expect, based on the weighted probability of all possible rates of return, before parting with their money.Indeed, no company or individual should invest ...

Whether you’re calculating the expected return of an individual stock or an entire portfolio, the formula depends on getting your assumptions right.

Whether you’re calculating the expected return of an individual stock or an entire portfolio, the formula depends on getting your assumptions right.

Key Takeaways To calculate a portfolio's expected return, you need to compute the expected return of each of your holdings and its weight.

To calculate expected rate of return, you multiply the expected rate of return for each asset by that asset’s weight as part of the portfolio. You then add each of those results together.

First, multiply the probability of a positive outcome by the potential return to calculate expected return. Say an investment has a 60% chance of increasing in value by $10,000.

The goal of rational investors is to maximize total return under a given set of constraints.

You can estimate the expected value of your current venture, compare it to other opportunities and make a sensible decision on what is more beneficial for you.