File Name: risk and return analysis of equity shares .zip
Different avenues and alternatives of investment include share market, debentures or bonds , money market instruments, mutual funds, life insurance, real estate, precious objects, derivatives , non-marketable securities.
So, All of authors and contributors must check their papers before submission to making assurance of following our anti-plagiarism policies. India is one of the emerging economies, which have witnessed significant development in the stock markets during the liberalization policy initiated by the government. And Indian stock market is largely integrated with the world markets.
Why Zacks? Learn to Be a Better Investor. Forgot Password. Return on investment is the profit expressed as a percentage of the initial investment. Profit includes income and capital gains. Risk is the possibility that your investment will lose money.
With the exception of U. Treasury bonds, which are considered risk-free assets, all investments carry some degree of risk. Successful investing is about finding the right balance between risk and return.
Historical return on investment is the annual return of an asset over several years. Research analysts and professional investors use historical returns, along with industry and economic data, to estimate future rates of return. You can use actual results and estimated returns to evaluate various assets, such as stocks and bonds, as well as different securities within each asset category. This evaluation process helps you pick the right mix of securities to maximize returns during your investment time horizon.
Risk is the likelihood that actual returns will be less than historical and expected returns. Risk factors include market volatility, inflation and deteriorating business fundamentals. Financial market downturns affect asset prices, even if the fundamentals remain sound. Inflation leads to a loss of buying power for your investments and higher expenses and lower profits for companies. Business fundamentals could suffer from increased competitive pressures, higher interest expenses, quality problems and management inability to execute on strategic and operational plans.
Weak fundamentals could lead to declining profits, losses and eventually a default on debt obligations. You cannot eliminate risk, but you can manage it by holding a diversified portfolio of stocks, bonds and other assets. The portfolio composition should be consistent with your financial objectives and tolerance for risk. Investment returns tend to be higher for riskier assets. For example, savings accounts, certificates of deposit and Treasury bonds have lower rates of return because they are safe investments, while long-term returns are higher for growth stocks and other riskier assets.
Life events will require adjustments to your financial plan, including the asset mix in your investment portfolio. For example, the stock component of your portfolio may be high when you start your first job because you can afford to take more risks and want to grow your investments as quickly as possible.
Your portfolio may change to a balanced mix of stocks and bonds when you start a family and switch to mostly bonds and dividend-paying stocks as you get closer to retirement. Market movements may also require periodic portfolio adjustments. For example, you may take some profits in stocks following a sharp stock market rally or invest in quality stocks at bargain prices after a sharp market correction.
Based in Ottawa, Canada, Chirantan Basu has been writing since His work has appeared in various publications and he has performed financial editing at a Wall Street firm. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors.
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These returns cover a period from and were examined and attested by Baker Tilly, an independent accounting firm. Visit performance for information about the performance numbers displayed above. Bond Vs. References Investor. Related Articles.
Equity Investments 2 Reading Overview of Equity Securities Subject 5. Risk and Return Characteristics of Equity Securities. Why should I choose AnalystNotes? AnalystNotes specializes in helping candidates pass. Find out more. Subject 5.
PDF | Stock market is a market where a number of securities are traded such as equity shares, debentures, bonds, insurance products, mutual.
For example, the magnitude of returning an amount equal to three times the original investment is stronger than an amount equal to two times your investment. The risk of loss means the chances that the investment will fail. For example, the chance of failure of an investment might be one chance in three. In this situation, the probability of failure is 33 percent.
The higher the risk undertaken, the more ample the expected return — and conversely, the lower the risk, the more modest the expected return. Risk refers to the variability of possible returns associated with a given investment. Risk, along with the return, is a major consideration in capital budgeting decisions. The firm must compare the expected return from a given investment with the risk associated with it. Higher levels of return are required to compensate for increased levels of risk.
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