# What are investment returns and how are they calculated?

Returns in investing are the earnings generated from an investment over a period of time. They can be measured in absolute terms, such as dollars, or in relative terms, such as percentage.

### How do you measure the returns of individual securities?

There are several ways to measure the returns of individual securities. The most common method is to calculate the percentage change in the security's price over a certain period of time. For example, if a security's price goes from \$100 to \$110 over the course of a year, its return would be 10%.

Another way to measure returns is to calculate the security's total return, which takes into account both price changes and any dividends or interest payments that the security has paid out over the period in question. For example, if a security's price goes from \$100 to \$110 and it pays out \$5 in dividends over the course of a year, its total return would be 15%.

It's also important to keep in mind that returns are not always linear. In other words, a security's return over one year does not necessarily tell you what its return will be over the next year. Returns can be volatile, and often vary quite a bit from year to year.

##### What are the 3 main types of investments?

The three main types of investments are stocks, bonds, and cash equivalents.

Stocks are equity investments that represent ownership in a corporation. When you purchase stock, you become a part-owner of the company and are entitled to a portion of the company's profits or losses. The value of your stockholding can rise or fall based on the financial performance of the company.

Bonds are debt instruments that are used by corporations and governments to raise capital. When you purchase a bond, you are lending money to the issuer and are entitled to interest payments. The value of your bondholding can rise or fall based on changes in interest rates.

Cash equivalents are investments that are easily convertible to cash. Money market funds and short-term government bonds are examples of cash equivalents.

### What is return in terms of investment?

The return on investment (ROI) measures the percentage of increase in value of an investment over a certain period of time. In order to calculate ROI, the following equation is used:

ROI = (Current Value of Investment - Original Value of Investment) / Original Value of Investment

For example, if an investor purchased a stock for \$100 and the current value of the stock is \$110, the ROI would be 10%.

ROI can be positive or negative, depending on whether the current value of the investment is higher or lower than the original value. If the current value is lower than the original value, the ROI will be negative.

ROI is a popular metric because it is a simple way to compare the performance of different investments. However, it is important to note that ROI does not take into account the time frame of the investment, which can be an important factor in deciding whether or not to invest in a particular asset.

##### How do you measure investment in a business?

There are a number of ways to measure investment in a business. The most common metric is return on investment (ROI). This is a measure of the profitability of an investment, expressed as a percentage of the original investment. For example, if an investment of \$100 generates a return of \$10, the ROI would be 10%.

Other common metrics include net present value (NPV) and internal rate of return (IRR). NPV is a measure of the profitability of an investment, expressed in terms of the present value of the cash flows generated by the investment. IRR is a measure of the return on an investment, expressed as a percentage of the original investment.

In addition to financial metrics, businesses often measure investment in terms of the resources invested. This can include the amount of money invested, the number of employees, the amount of time invested, or the number of customers.

##### What are the measures of return?

There are several measures of return, but the most common are total return and annualized return. Total return is the percentage change in the value of an investment over a period of time. Annualized return is the average annual return over a period of time.