what is the gross rate of return 
the gross rate of return is the total rate of return on an investment before the deduction of any fees commissions or expenses the gross rate of return is quoted over a specific period of time such as a month quarter or year this can be contrasted with the net rate of return which deducts fees and costs to provide a more realistic measurement of return understanding gross rate of returnthe gross rate of return on an investment is one measure of a project or investment s gross profit it typically includes capital gains and any income received from the investment by comparison the net rate of return deducts fees and expenses from the investment s final value the formula for gross rate of return is gross rate of return final value initial value initial value text gross rate of return frac text final value text initial value text initial value gross rate of return initial value final value initial value the rate of return for any specific investment can be calculated in a number of ways and it is important to understand the differences special considerationsdetails on how an investment company calculates returns are often included in the fund s prospectus the gross rate of return is often quoted as the rate of return on an investment in fund marketing materials returns for more than a year are often annualized which provides the geometric average return of an investment for each year over a given time period in investment management the cfa institute s global investment performance standards gips govern the calculation and reporting of returns investors can rely on the gips return standards for comparing investment return characteristics across the industry types of gross returninvestors often use return calculations when considering a new investment or assessing the performance of an investment net return is typically not as easily identified as a gross return for this reason investors often turn to the expense ratio in order to determine how the expenses affect the return of the fund the expense ratio is a mutual fund characteristic that represents the percentage of fund assets paid for expenses it is often used in conjunction with a fund s total return and benchmark return to provide a comparison of the fund s performance as an example a fact sheet provided by one of the market s top large cap funds the quanti fied stf fund mutf qstfx provides an example of how returns and expenses are expressed the quantified stf fund reports a gross rate of return it also provides a breakdown of the fund s expenses and has an expense ratio of 1 71 gross rate of return vs net returnfor net return fees and commissions are deducted as well as the effects of taxes and inflation a currency loses purchasing power due to inflation which also affects the return on an investment therefore inflation should be included in the calculation of real return if for example annual inflation is 2 and the nominal return on an investment is 1 the investor will have made a negative real return in the course of one year thus the gross rate of return can be substantially different than the net rate of return which deducts fees and expenses for example the gross return realized on a mutual fund that charges a 5 75 sales charge will be very different than the net return which will be realized after the charge has been deducted 