An absolute return is the actual amount of money made by an investment; the actual gain as a percentage of the amount invested. In contrast, relative returns are adjusted to show performance compared to a benchmark. Investment performance is often measured using relative returns. Relative returns allow investors to see how much of their gains were the result of good decisions, and how much merely reflected market movements. Absolute returns nonetheless matter because what matters most to investors is how much money they have, which depends on the absolute return.
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