Category: investments

  • What is the market portfolio?

    What is the market portfolio?

    The market portfolio is the market value-weighted portfolio of all risky assets in an economy. In this post, we show how the market portfolio is equivalent to the optimal risky portfolio when all investors behave according to the modern portfolio theory. Learning objectives Moving from the optimal risky portfolio to the market portfolio According to […]

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  • What is the optimal risky portfolio?

    What is the optimal risky portfolio?

    In the previous post, we explained that when there is no risk-free asset in an economy, investors should invest in one of the efficient portfolios that lie on the efficient frontier based on their risk tolerance. We added that, if a risk-free asset exists, then there is a unique efficient portfolio that all investors should […]

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  • The risk of a portfolio – Calculator and formula

    The risk of a portfolio – Calculator and formula

    We often say that risk and return are two sides of the same coin. You can’t discuss one without the other. In the previous post, we showed you how to calculate the return on a portfolio of assets. In this post, we explain the formula for portfolio risk. We also offer an easy-to-use portfolio risk […]

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  • Portfolio return calculator and formula

    Portfolio return calculator and formula

    In this post, we explain the formula behind the calculation of portfolio returns. Furthermore, we provide a free online portfolio return calculator, which works as a portfolio expected return calculator as well as a portfolio realized return calculator. Finally, with this port, we make an introduction to the modern portfolio theory as well. So far […]

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  • Expected return calculator and formula

    Expected return calculator and formula

    When evaluating an asset’s past performance, we can make use of the historical (or realized) average return. In that sense, the historical average return is a backward-looking measure. But, in order to forecast an asset’s future performance, we need a forward-looking measure. This measure is called the expected return. In this post, we explain the […]

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  • Holding period return calculator and formula

    Holding period return calculator and formula

    In this post, we explain the holding period return formula with examples and offer an easy-to-use holding period return calculator. When investors buy securities (e.g., stocks), they may hold them for months or years before selling them. The duration during which an investor holds on to a particular security is known as the holding period […]

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  • Real return vs nominal return

    Real return vs nominal return

    Real return vs nominal return: How do they differ from one another? Suppose that an asset yields a return of 50% over a year. So, if you invest $10,000 today, your investment grows to $15,000 by the end of the year. Sounds not too bad, right? But, imagine that the inflation rate over the course […]

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  • Return calculations in 3 easy steps

    Return calculations in 3 easy steps

    Investing is all about realizing a positive return. But, how do you calculate returns? In this post, we discuss the fundamentals of return calculations. We begin by explaining why investors are interested in calculating returns. Then, we teach you how to calculate gross returns and net returns. We discuss the concept of total return as […]

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