what is a negative return 
a negative return occurs when a company experiences a financial loss or investors experience a loss in the value of their investments during a specific period of time in other words the business or individual loses money on either their business or their investment the term negative return can refer to either a net loss across all your investments and businesses or to a loss on any specific investment or business a negative return for a business is also referred to as a negative return on equity understanding a negative returna negative return is most commonly utilized when referring to an investment investors allocate capital to certain securities they believe will appreciate based on their research whether that be fundamental research or technical research if the securities they choose appreciate in value they will have a positive return conversely if the securities depreciate in value resulting in a loss they will have a negative return on their investments investors can offset the losses in a portfolio against the gains to reduce their capital gains tax return on investment roi is a financial metric often used to calculate an individual s returns negative returns can also be used to refer to the profit or loss of a business in a specific period for example if a company generated 20 000 in revenue but had 40 000 in costs it would then have a negative return some businesses report a negative return during their early years because of the amount of capital that initially goes into the business to get it off the ground spending a lot of money capital when not bringing in any revenue will lead to a loss new businesses generally do not begin making a profit until after a few years of being established investors in a company will be willing to stick around if they know that the company has the potential to quickly turn its negative return into a positive return and bring in high profits sales or asset turnover however if a business is continuously experiencing negative returns without a solid business plan to turn operations around then investors may lose faith in the company this can result in a decrease in a company s share price as well as difficulty in obtaining financing continuous negative returns in business will lead to bankruptcy negative returns can also be used in relation to projects that companies invest in usually requiring debt financing for example a company decides to purchase new equipment to expand its business and borrows money to do so if the interest rate on the loan used to buy the equipment is higher than the returns the company is receiving from the new equipment it will have experienced a negative return on that capital investment example of a negative returnassume charles received 1 000 as a gift and wants to invest that money he does research on a few stock suggestions provided to him by his friend he decides to invest in two stocks equally company abc and company xyz he buys 500 of each stock after one year charles looks at his portfolio he sees that company abc has appreciated in value to 600 while company xyz has depreciated in value to 200 while he has a positive return on company abc he has a negative return on company xyz also his overall portfolio has a negative return of 200 the invested value was 1 000 and the current value is 800 these are unrealized gains and losses and charles can either continue holding the stocks or sell them if he sells them the loss on company xyz is tax deductible on the gains of company abc reducing charle s capital gains tax 