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Concepts of Return and Risk
Concepts of Return Definition: Return represents the total gain or loss experienced on an investment over a specified period. It's the net result of all cash flows and changes in the investment's value. Components: Capital Appreciation (Capital Gain/Loss...
Types of Return: Absolute Return
Calculation and Utility The fundamental understanding of investment returns lies in how to determine the overall performance for any given instrument. Definition: Absolute return measures the total percentage gain or loss on an investment over a specific pe...
Types of Return: Average Return (Arithmetic Mean)
Average return, specifically the arithmetic mean, is a commonly used measure to summarize investment performance over multiple periods. Definition: Average return is the arithmetic mean of returns calculated over a series of time intervals. It provides a si...
Types of Return: Expected Return (Probability-Weighted Average)
Expected return is a more forward-looking measure than the simple average return. It tries to incorporate the potential range of outcomes and their likelihood to provide a more realistic picture of potential performance. Definition: Expected return is the p...
Types of Return: Holding Period Return (HPR)
Holding Period Return (HPR) is a straightforward metric that measures the total return generated by an investment over the specific period it was held. Definition: Holding Period Return (HPR) measures the total percentage gain or loss on an investment durin...
Types of Return: Effective Annualized Return (EAR)
The Effective Annualized Return (EAR) is designed to provide a comparable annual rate of return when investments have different compounding frequencies. Definition: Effective Annualized Return (EAR) is the actual annual rate of return taking into account th...
Types of Return: Portfolio Return (Weighted Average)
Portfolio return is a fundamental concept in investment management, as it represents the overall performance of a collection of assets. Definition: Portfolio return is the weighted average of the returns of all individual assets within a portfolio. The weig...
Risk-Adjusted Return Measures
Evaluating Performance Beyond Simple Returns Raw return figures only tell part of the story. To make meaningful comparisons between investments, you must consider the risk taken to achieve those returns. Risk-adjusted return measures provide a more comprehensi...
Causes (or Sources) and Types of Risk
A Comprehensive Analysis Understanding the different types and sources of risk is crucial for effective portfolio management. The core categories provided – Systematic and Unsystematic risk – are fundamental. 1. Systematic Risk (Market Risk / Non-Diversifiable...
Calculation of Total, Systematic, and Unsystematic Risk
Quantifying Investment Risk 1. Total Risk: Definition: Represents the overall variability or uncertainty of an investment's returns. It encompasses both systematic and unsystematic risk. Measurement: Standard Deviation (σ) of returns. Standard deviation ...
Impact of Taxes and Inflation on Investment
A Realistic View of Returns 1. Computation of Post-Tax Return Explanation: Tax on investment gains can significantly reduce the actual return received. Calculating the post-tax return is essential for making informed investment decisions. Formula (as prov...
Introduction and approaches
Determining Investment Worth Security analysis is a vital process for anyone involved in financial markets. It helps investors sift through the vast array of available securities and make informed decisions. Definition: Security analysis is the process of ...
Fundamental Analysis
The EIC Framework (Expanded) The EIC framework provides a structured and comprehensive approach to fundamental analysis. It breaks down the analysis into three key areas: Economy, Industry, and Company. Here's a more elaborate explanation: Top-Down Approach:...
Technical Analysis
Charting the Course of Price Movements Technical analysis offers a contrasting approach to fundamental analysis, focusing on historical price and volume data to attempt to predict future price movements. Basic Tenets of Technical Analysis : Market Discounts ...
Fundamental Analysis vs. Technical Analysis
A Head-to-Head Comparison The provided table accurately summarizes the key differences between fundamental and technical analysis. Basis Fundamental Analysis Technical Analysis Objective Evaluates intrinsic value (what a security is really worth) Predi...
Introduction, objectives and constraints
This unit bridges the gap between individual security selection and the overarching strategy of wealth management. Portfolio management focuses on the ongoing creation and maintenance of optimal asset groupings. Estate planning deals with protecting wealth and...
Asset Allocation
The Foundation of Portfolio Construction Definition: Asset allocation is the process of strategically distributing investment funds across various asset classes (e.g., stocks, bonds, real estate, commodities, cash) to optimize the portfolio's risk-adjusted...
Portfolio Management Services (PMS)
Strategies for Active and Passive Approaches Portfolio Management Services offer a more personalized approach to investing than just buying mutual funds. They can be broadly categorized based on the level of active management involved: passive and active. The ...
Portfolio Analysis
Quantifying Performance and Risk Portfolio analysis provides the tools to evaluate the effectiveness of a portfolio in achieving its objectives. The core elements are return and risk, and the key is to quantify these measures. 1. Portfolio Return Explanation...
Estate Planning
Ensuring a Smooth Transfer of Wealth Estate planning is a critical but often overlooked aspect of wealth management. It ensures that your assets are distributed according to your wishes and in a tax-efficient manner, protecting your loved ones and legacy. De...