Simply, the rate of return is profit, it could be a dollar amount or percentage of how much was invested. It is impossible to know exactly what the rate of return is just as it is impossible to predict the future; the best that can be done is to make an educated guess. Factors that can influence this guess and subsequently the rate of return are: time value of money, whether or not the rate is reinvested (compounding), if the rate of return is through foreign currency, and whether or not the investment venture is risky. Time value of money can be estimated with longitudinal studies; possible inflation rates, bank’s interest rates? Deciding to reinvest the rate of return would mean more profit; return is higher for compounded interest than simple interest. For foreign currency your are estimating the exchange rate. Investing in a risky stock might produce a high rate of return if it does well or a heavy loss if it does poorly. The best rate of return might come from the following: investing in a low risky stock that pays out quarterly but then reinvesting that return next quarter.