What formula is used to calculate the return on a real portfolio?

The return on a real portfolio is typically calculated by determining the difference between the value of the portfolio at a given point in time and its initial cost. This method captures the actual performance of the investments within the portfolio, reflecting gains or losses from the initial investment.

The formula involves subtracting the initial cost of the portfolio from its current value, providing a straightforward measure of returns that accounts for the actual monetary outcome derived from the investments. This approach aligns with fundamental investment principles, focusing on the net amount gained or lost over the duration of the investment.

Understanding this formula is pivotal for evaluating investment performance, enabling investors and portfolio managers to assess how well their strategies and choices have performed in generating value.