Investment returns, dividends and savings products
7 min read · Updated 2026-10-12 · MoneyCalc
Four numbers get confused: the return, the yield, the fee and what is left after inflation. Knowing the difference between them is what separates an investment that appears to perform well from one that actually does. A return of five per cent with one per cent in fees and four per cent inflation is not growth.
Return, cost and the gap between them
Return on investment compares the profit with what it cost to make the profit, and it is the most general measure there is. The benchmark figures quoted for investments are usually total returns before fees, which flatters the actual outcome.
A fund charging one per cent against a return of five has consumed a fifth of the gain. Over decades that difference compounds into a substantial sum, and it is the single most reliable way active products lag the index they track.
Dividend yield and total return
Dividend yield is the annual dividend divided by the share price. It looks comparable across investments and is not: a high yield may reflect a share price that has fallen, and it says nothing about whether the business is growing.
Total return combines price movement with distributions, and it is the only figure that compares investments fairly. A share that fell twenty per while paying a five per dividend returned minus fifteen per, not plus five.
Certificates of deposit and fixed-rate savings
A certificate of deposit fixes a rate for a term, and in exchange typically restricts access until maturity. The appeal is a known return and deposit protection; the cost is that the money is unavailable and that reinvestment risk sits ahead if rates fall.
Compare on the net basis: the rate after any tax, over the actual term. A headline rate compared across accounts is only comparable if the compounding, the tax treatment and the access terms are the same.
Savings rate, compounding and goals
The savings rate — what you keep divided by what you earn — predicts future circumstances better than any market return. Someone saving twenty per cent of a modest income will have more at fifty than someone earning substantially more and saving almost nothing.
Compounding does the rest, which is why the same monthly amount invested for forty years versus thirty produces a strikingly different total. The longer the horizon, the less the starting amount matters and the more the rate and the consistency do.
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Common questions
What is a good investment return?
It depends on the asset and the period. Long-run equity returns are typically in the region of 7 to 10 per cent before fees and inflation, and anything much higher sustained should be treated with suspicion.
How do fees affect an investment return?
Subtract them from the gross return, and compare the result after inflation. A one per cent fee on a five per cent return consumes a fifth of the gain, and the effect compounds over time.
Why does the savings rate matter more than the return?
Because it determines how much you actually keep. A consistent saver with modest returns usually ends up further ahead than a higher earner who saves little.
MoneyCalc provides general information only and is not financial, investment, tax or legal advice. Figures are illustrative and depend on your own circumstances. See our full disclaimer.