Category: investments
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Optimal risky portfolio
In previous lessons, we explained that when there is no risk-free asset in an economy, investors should invest in one of the portfolios that lie on the efficient frontier based on their risk tolerances. But, if a risk-free asset exists, then there is a unique portfolio that all investors should invest in. In particular, the…
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Portfolio return calculator and formula
In this lesson, we’ll teach you how to compute the return of a portfolio that consists of multiple assets. We offer a portfolio return calculator as well. Portfolio return calculator You can use the portfolio return calculator below to compute the returns of portfolios containing up to 5 stocks. Please note: Portfolio return formula So…
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Expected return calculator and formula
We can rely on the historical (or realized) average return when evaluating an asset’s past performance. In that sense, the historical average return is a backward-looking measure. But, to forecast an asset’s future performance, we need a forward-looking measure. This measure is called the expected return. In this lesson, we explain how to compute the…
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Holding period return calculator and formula
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 and the return over that period is referred to as the holding period return. This is typically abbreviated as HPR.…
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Real return vs nominal return
in investmentsIn this lesson, we explain the difference between nominal returns and real returns and demonstrate the impact of inflation on return calculations. You will also learn how to calculate the real rate of return using the nominal rate of return and the inflation rate. How does inflation affect investment returns? Inflation can be loosely defined…
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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…
