Gross APY

Gross APY refers to the total annual return on an investment, including interest earned and any compounding effects, before any fees or taxes are deducted. It represents the interest rate that is earned on an investment over a year, assuming the interest is reinvested.

Context

Gross APY is an important metric for evaluating the potential returns of an investment, especially in interest-bearing accounts like savings, certificates of deposit (CDs), or real estate investment trusts (REITs). It shows the total return before any deductions, which allows investors to understand the maximum earning potential. However, net returns may differ once fees and taxes are applied. In real estate investments, it can help compare different income-generating properties or vehicles.

Example

If you invest $10,000 in a savings account offering a gross APY of 5%, at the end of the year, the account will have earned $500 in interest, assuming the interest is compounded and reinvested throughout the year. However, actual earnings may be lower once taxes or fees are deducted.