Rate of return is the increase in value of an investment over a period of time – usually a year. So if your annual rate of return is 5%, your investment will increase by 5% every year (from $10,000 to $10,500, for example).
Posts Tagged ‘investing’
Rate of Return is…
Sunday, July 5th, 2009Breathe In, Breathe Out, Breathe In, Breathe Out… Overreacting During Difficult Times
Tuesday, June 23rd, 2009Making investments can sometimes be stressful. Now add a recession and you might be swept up in some pretty powerful emotions. If you feel yourself feeling this way, you should check out what several respected financial psychologists have to say.
- During stressful times (like a recession), people’s tendency to react emotionally to a situation is greatly exaggerated. Emotionally charged investment decisions usually do not lead to higher earnings.
- Behavioral finance tries to understand how people react to stressful situations and how they affect people’s investment choices.
- These ‘biases’ are hard to overcome – we are emotional beings, but understanding how emotions influence decision-making can reduce the degree and scope of their impact.
Facts & Figures
- The ‘anchoring’ bias is where an investor gets too attached to an asset and cannot make practical decisions involving it.
- The ‘loss aversion’ bias is where investors do not sell a falling asset because they would be acknowledging the loss.
Best Quote
“What was a great trait for surviving and thriving in the jungle doesn’t work so well in the stock market.” – Brad Klontz, Financial Psychologist.
Venture Capital is…
Wednesday, June 10th, 2009Venture capital is funding given to small businesses and startup companies, usually in exchange for a stake in the company. The people who offer it – venture capitalists – only do so if they believe the company will be a great success: they trade monetary aid now for a part of your profits later.