What Are Stock Returns?

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Stock returns is a variable for assessment of investment success or performance of an equity exposure. While the dividend yield is the ratio of dividend at the current rate, the stock yield is a measure of growth levels in value of an equity exposure over time.

And takes into account both the costs incurred in the period of dividends and further price gains that may have occurred.

Investments can yield cash returns to an investor, thus compensating the investor for the note value of funds invested. Excluding some unusual times of substantial deflation, a sum of money in cash is worth less today in comparison with its value the previous day.

In the main, sound investments are made on the grounds of forecasts on future inflation rates, and the risk entailed by a given investment option.

The time value of money is interpreted via the interest rates which banks tender for deposits and loans. While the risk-free rate is the highest rate which comes without necessarily taking any risk on capital.

On the other hand, the rate of return derived from an investment is known as the discount rate, and an investor has to expect dissimilar discount rates on various investments. The greater the risk on an investment, the higher the discount rate anticipated by the investor on an investment.

The dividend yield on a stock can by defined only by a positive return. Since the stock return also depicts losses, the stock return can also be negative.

Shares and property are actually not subject to inflation, hence long holding periods can even with moderate inflation provide a great return advantage over a fixed income investment.

The bulk of investment options hold substantial risk so much that the investor can end up with some heavy losses on part or all of the invested capital. Investments in company stock shares typically place an investor’s hard earned capital at significant amounts of risk. In principle, the economic value of a stock share heavily relies on the amount a counterparty is prepared to compensate for it, at a given stage.

Contrary to capital placed in a savings account, the economic value of a stock share varies incessantly. In the event that the price is significantly stable, the stock is regarded as having low volatility. While the opposite translates to high volatility, and to a large extent all stock shares come with some degree of volatility, and variations in price have direct impact on the rate of return as regards stock investments.
 

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