Found 1748 Articles for Growth & Empowerment

A risk-free asset comes with a virtually guaranteed return. Usually, all investments have a degree of risk associated with them, so the term "risk-free" is used to mean the assets that are sufficiently safe so that investors can remain sure to get a return on their investment that is somehow close to the return predicted for the asset while investing.A risk-free asset has a definite future return, whatever the risk of the assets is. This type of asset often provides a certain return providing investors a level of assurance over the return from the.The United States Treasury Bills are a ... Read More

The Arithmetic Average Return is calculated by adding the rate of returns of "n" sub-periods and then dividing the result by "n". In other words, the returns of "n" sub-periods are added and then divided by "n" to find the value of the average return. As it is also the process of finding the average of a series of numbers, the average return is sometimes called as "Arithmetic Average Return".Here is the formula to calculate Arithmetic Average Return −$$\mathrm{Average\:Return =\frac{Total\:Value\:of\:the\:Return}{Total\:Number\:of \:Returns}}$$Investors and market analysts normally use the arithmetic average return to check the past performance of a stock. It is ... Read More

The typical reason for an investor to invest in a financial instrument is to make current income from dividends and interest income. For a stable company, the investments will earn a reasonable return that is the Expected Rate of Return (ERR) on given investments. Some investments such as debentures, bank deposits, public deposits, bonds, etc. carry a predetermined fixed rate of return that is usually payable periodically.Note − The sole aim of the investor investing in a single asset is to get the maximum returns. Some fixed income instruments offer less returns, but they are less risky too. Increasingly risky ... Read More

Present Value of Growth Opportunities or PVGO represents the component of a company’s share value that relates to expectations of the investors in the growth of earnings. PVGO is the difference between the total value of a company’s shares from which the net present value of its earnings is deducted, assuming there is no growth in the values of the share. PVGO is also known as "value of growth".A company’s future income can be better represented in two layers: the first layer represents a perpetuity having constant return and the second layer represents the future growth in earnings.$$\mathrm{𝑉_{0} = PV_{NG} ... Read More

Rather than taking each rate of return and multiplying them with the weight to get the total weight of each asset, there is a simple formula to calculate the expected rate of return. The expected rate of return of a portfolio or simply the return of a portfolio is the given weighted average of the expected returns on the assets.ExampleLet's take an example of a two-asset portfolio and see how to calculate its expected return. Let’s assume an investor has invested 50% of his investment in X and 50% in Y.$$\mathrm{ERR\:of\:Portfolio = (Weight\:of\:Security\:X × 0.5) + (Weight\:of \:Security\:Y × 0.5)}$$Note ... Read More

Unrealized gains are profits from the stock price increase over the buying price of the stocks one still owns. The gains are unrealized as you have not realized the increase in profits in your bank account yet. In such cases, one won't understand the gain until one sells the stock, and the price could change again before the stocks are sold.Unrealized gains do not consider the taxes one will owe when he or she does cash out. Neither does it consider the transaction commissions to sell the stock. When the investors sell the stock, they will have to pay taxes ... Read More

Interest on Ordinary SharesA Rate of Return (RoR) is the loss or gain from an investment that is held over a certain period of time. In other words, the rate of return of an investment is the loss (or gain) compared to the initial cost or investment. The net gain or loss is typically expressed in percentage terms. When the RoR is negative, it is considered a loss and when the ROR is positive, it reflects a gain on the investment.RoR is calculated with the following formula −$$\mathrm{RoR =\frac{End\:Value\:of\:Investment − Initial\:Value\:of\:Investment}{Initial\:Value\:of\: Investment}× 100}$$The point to note here is that any gains or losses ... Read More

Preference shares are ownership security or equity. However, preference shareholders do not have any voting rights in a stockholders’ meeting. Preference shares pay dividends that are mentioned in the prospectus when the share is bought. Preference share dividends are paid before common stock dividends.Note − Preference shares are ‘preferred’ so they need to be paid before common shares.Calculating the yieldYield is the effective interest rate obtained from the preference share as dividends. The yield is equal to the yearly dividend divided by the current price of the stock.Suppose a preference share of INR 120 pays dividends of INR 50 per ... Read More

There is a distinct difference between "growth shares" and "income shares", however finding the value of grown and income shares is easier said than done. Even in mature markets, the difference between the growth shares and the income shares is not clear. Let’s take a closer look at both the types and differentiate the two.Growth SharesGrowth shares are those shares whose company earnings are estimated to grow at a faster rate than the market. These shares, therefore, have the chance to rise incredibly faster than the market. Growth stocks tend to have a high price-to-earnings (PE) ratio, indicating that they ... Read More

Risk Preference is one’s tendency to choose either a risky or less risky option. Usually, economists and finance professionals, and investors apply the concept of risk preference in economics, but the concept can be applied to any decision one makes that involves risk. There are several types of risk preferences, and the risk involved generally depends on the decision-maker and the investor for whom the decision-maker takes the risk.Risk-Seeking PreferenceThe risk-seeking preference applies to investors who are willing to take increased risks to achieve higher-than-usual returns. It is necessary to weigh all the factors associated with the risk and assess ... Read More