Required return

Required return

The minimum expected return you would need in order to purchase an asset, that is, to make the investment.

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Required return

Also called required rate of return; in securities, the minimum acceptable rate of return at a given level of risk. Different investors have different reasons for choosing their required returns. Normally, a person's or institution's cost of capital determines it. For example, an investor may also carry a debt with a high interest rate; if an investment does not meet a required rate of return, it would make more sense for the investor to pay down his/her debt. The required return is also related to the amount of risk an investor is willing to accept. One with a portfolio consisting largely of bonds will generally have a lower required return than one whose portfolio contains mainly stocks. See also: Markowitz Portfolio Theory.