In an investment management company such as a mutual fund, you will come across two types of returns being calculated, namely, returns on a gross, or net of fee basis. While there are some industry practices for calculating these returns, all fund managers don’t strictly follow one method. In simple words, the gross returns refer […]
Portfolio Management
How to Calculate Portfolio Returns
We have learned about how to calculate the returns on single assets. However, portfolio managers will have many assets in their portfolios in different proportions. The portfolio manager will have to therefore calculate the returns on the entire portfolio of assets. The returns on the portfolio are calculated as the weighted average of the returns […]
How to Calculate Annualized Returns
When we make investments, we invest our money in different assets and earn returns for different periods of time. For example, an investment in a short-term Treasury bill will be for 3 months. We may invest in a stock and exit after a week for a few days. For the purpose of making the returns […]
Arithmetic Returns Vs. Geometric Returns
While calculating the returns on financial assets, we will often look at the returns from multiple holding periods. For example, one may hold an asset for five years, and the asset may have earned total 150% returns over this period of 7 years. However, it is difficult to interpret these returns as we cannot compare […]
Portfolio Risk and Return – Part 2B – Video
This video by Arif Irfanullah provides a very clear conceptual understanding of the portfolio risk and return concepts as a part of the CFA Level 1 syllabus. This video talks about: Beta – Calculation and Estimation Capital Asset Pricing Model (CAPM) Assumptions Security Market Line Applications of CAPM, including estimating expected returns, and evaluating portfolio […]
Portfolio Risk and Return – Part 2A – Video
This video by Arif Irfanullah provides a very clear conceptual understanding of the portfolio risk and return concepts as a part of the CFA Level 1 syllabus. This video talks about: CAL vs. CML Risk and Return on the CML CML with Different Lending and Borrowing Rates Types of Risk Return Generating Models, such as […]
Portfolio Risk & Return – Part 1B – Video
This video by Arif Irfanullah provides a very clear conceptual understanding of the portfolio risk and return concepts as a part of the CFA Level 1 syllabus. This video talks about Markowitz Efficient Frontier Capital Allocation Line Risk Aversion Risk-Return Indifference Curve Optimal Investor Portfolio
Portfolio Risk & Return – Part 1A – Video
This video by Arif Irfanullah provides a very clear conceptual understanding of the portfolio risk and return concepts as a part of the CFA Level 1 syllabus. This first video talks about Major return measures Major asset classes for investments Evaluating investments Covariance and correlation Risk and return of a two asset portfolio Efficient Frontier […]
How to Calculate the Holding Period Returns
For investments, the Holding Period Return (HPR) refers to the total return earned from an investment or an investment portfolio over the holding period, that is, the period for which the asset or portfolio was held by the investor. The holding period can be anything such as 1 day, 1 month, 6 months, 1 year, […]
Major Types of Return Measures
For the purpose of portfolio construction, the financial assets are primarily looked at from the perspective of risk and returns. Based on the analysis of risk and returns we analyse thousands of securities and portfolio combinations before making the right selection for our own portfolio. Therefore, it is important that we have a deeper understanding […]