Cutting down your expense to save some money is not all that you need to do for ensuring your financial security. If you are interested in making your future secured, you need to plan your investment in the right way. You will have to take note of the interest rate or the return that you earn from the investments. You also need to understand the type of return, whether it is fixed or floating. When you are planning to make some financial investments, you can consider about the absolute and variable return on money and then make the investments. Yet, before that, you need to have a complete idea on the concept of absolute return.
Someone who is new to the financial field may not have a complete knowledge of different financial terms and their meanings. If you are one of them, you need to note that the term absolute return refers to the benefits earned by a stake over a prescheduled period of time. With the help of this measure, the depreciation on the value of a stock or the appreciation on the value of the stock is calculated for a fixed period of time. And then, the dividends on the stocks are decided.
When you are interested to get the best return from the money that you have invested on stocks, you need to know other details related to it. It is important to know what is absolute return but that is not all. You also need to know how it differs from relative return. Relative return helps in calculating the variation between market performance of a stock and the absolute return on it. Relative return is assessed with the help of index or benchmark. To calculate the returns and to make a proper comparison of the stocks, one needs to have an in-depth knowledge of the working of an index
When you are making investments on stocks or mutual funds with absolute return, you should also be aware of the possible risks of investing in these funds. You should know how to calculate absolute return by noting the variables which actually effects the growth of the fund. It is good to invest in mutual funds with this type of return. However, one should know it well that higher gain might pose big threat to the fund. For Ex: If you have invested $ 10000 and after 21 months you got return of $22045. Now Divide the Investment amount by Absolute Return and Deduct the Amount By 1to get the actual money in percentage: 10000/22045 1 = 120.045%
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on What Is Absolute Return? How To Calculate Absolute Return?
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