Warren, What The Heck Is An Investment Return?

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Abstract

erstand.<h2 id="0b56">The Basics of An Investment Return</h2>So, to hell with the confusion, the basics of an investment return are actually very simple.<blockquote id="a961">An investment return is just the money made (or lost) from an investment.</blockquote>A Basic Example<ul><li>In my previous article, about <a href="https://readmedium.com/warrens-beginner-investing-series-article-links-79bda3850f34">assets</a>, I mentioned that I used to keep chickens and would collect and sell their eggs.</li><li>For simplicity lets say it cost me $5 to buy one chicken and another $ 5 in costs to look after the chicken. This $10 is my investment.</li><li>During its laying life I am able to collect and sell eggs for cash totalling $ 13.</li><li>After the chicken stops laying I am able to sell the chicken to my neighbour (for their Sunday roast) for another $2.</li><li>So, the chicken has created $ 15 in cash f

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or me. This means that my humble chicken has generated $5 over-and-above my investment of $ 10.</li><li>This extra $5 is my return.</li><li>Looking at my return as a percentage (so we can say we are as smart as Wall Street): $ 5 divided by $10 equals 0.5 or 50%.</li><li>My hypothetical chicken investment generated a 50% return.</li></ul>Calculating investment returns can get a little more complicated than the example above but, the principle always remains the same.I will talk more about calculating investment returns in a future article in this series.Coming soon.<ul><li>Article #4: Warren, Why The Heck Do We NEED To Invest?</li></ul>Disclaimer: This story is for informational purposes only. It is not intended as financial advice. Always undertake your own due diligence and seek advice from a financial professional.</article></body>

Beginner Investing Series #003

If this is the first article you have come across in the series you might like to catch up and read the others here.

Type into Google “What is an investment return?” and the results will give you a list of definitions. Definitions for ROI, ROE, ROIC etc. etc. and most of it is written in investment professional jargon.

It’s bloody confusing for a first time investor to understand.

The Basics of An Investment Return

So, to hell with the confusion, the basics of an investment return are actually very simple.

An investment return is just the money made (or lost) from an investment.

A Basic Example

In my previous article, about assets, I mentioned that I used to keep chickens and would collect and sell their eggs.

For simplicity lets say it cost me $5 to buy one chicken and another $5 in costs to look after the chicken. This $10 is my investment.

During its laying life I am able to collect and sell eggs for cash totalling $13.

After the chicken stops laying I am able to sell the chicken to my neighbour (for their Sunday roast) for another $2.

So, the chicken has created $15 in cash for me. This means that my humble chicken has generated $5 over-and-above my investment of $10.

This extra $5 is my return.

Looking at my return as a percentage (so we can say we are as smart as Wall Street): $5 divided by $10 equals 0.5 or 50%.

My hypothetical chicken investment generated a 50% return.

Calculating investment returns can get a little more complicated than the example above but, the principle always remains the same.

I will talk more about calculating investment returns in a future article in this series.

Coming soon.

Article #4: Warren, Why The Heck Do We NEED To Invest?

Disclaimer: This story is for informational purposes only. It is not intended as financial advice. Always undertake your own due diligence and seek advice from a financial professional.