1. What is Dollar Return?

Dollar Return (DR) is a simple financial metric that measures the absolute dollar amount gained or lost on an investment. It represents the difference between the ending value and the initial value of an investment.

2. How Does the Calculator Work?

The calculator uses the Dollar Return formula:

Where:

• \( DR \) — Dollar Return (dollars)
• \( EV \) — End Value (dollars)
• \( IV \) — Initial Value (dollars)

Explanation: A positive result indicates a profit, while a negative result indicates a loss. This calculation provides the absolute monetary change without considering the time period or initial investment size.

3. Importance of Dollar Return Calculation

Details: Dollar Return is fundamental for assessing investment performance, comparing different investment outcomes, and making informed financial decisions. It provides a straightforward measure of monetary gain or loss.

4. Using the Calculator

Tips: Enter both values in dollars. The end value represents the current or final value of the investment, while the initial value represents the original amount invested. Both values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between dollar return and percentage return?
A: Dollar return shows absolute monetary change, while percentage return shows relative change compared to the initial investment, making it better for comparing investments of different sizes.

Q2: Does dollar return consider the time value of money?
A: No, dollar return is a simple calculation that doesn't account for the time period or inflation. For time-adjusted returns, consider using annualized return or other time-weighted measures.

Q3: Can dollar return be negative?
A: Yes, a negative dollar return indicates a loss where the end value is less than the initial investment amount.

Q4: How is dollar return used in portfolio management?
A: It helps investors quickly assess the monetary impact of individual investments and overall portfolio performance in absolute terms.

Q5: Should I use dollar return for long-term investment analysis?
A: While useful for quick assessment, long-term analysis should also consider percentage returns, risk-adjusted returns, and the effects of compounding for comprehensive evaluation.