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30 votes

Are Certificates of Deposit worth it compared to investing in the stock market?

The difference is downside risk. Your CD, assuming you are in the US and the CD is purchased from a deposit bank, will be FDIC insured, your $10,000 is definitely coming back to you. Your stock ...
quid's user avatar
  • 49k
24 votes

Why isn't there a universal investment standard/benchmark?

Here are some (non-exhaustive) reason why different benchmarks are used, or why a constant benchmark is not optimal: Returns are different in different time periods. In your golf analogy, par is ...
D Stanley's user avatar
  • 136k
22 votes
Accepted

What is the real return of a portfolio? Markowitz vs "real" return

Analysis in the Markowitz model is intended to be done over a single investment period (source). Here you've stretched it out to 5 annual periods, so you're outside the bounds of the model. The ...
glibdud's user avatar
  • 740
19 votes

Are Certificates of Deposit worth it compared to investing in the stock market?

Growth and volatility are a matched set. Growth is how well the investment will grow on average. In the long term, this is a sure thing. Volatility is how much the value will jerk up and down in ...
Harper - Reinstate Monica's user avatar
19 votes

Are Certificates of Deposit worth it compared to investing in the stock market?

Reliability A CD is guaranteed to pay its return on maturation. So if you need a certain amount of money at a specific time in the future, the CD is a more reliable way of getting it. The stock ...
Brythan's user avatar
  • 21k
17 votes
Accepted

Rate of return on an Life Insurance Annuity

your real gain is only 50K. You are correct about the nominal gain in dollars (ignoring inflation). It is $50,000. This comes out to a 2% rate of return. But that is not totally correct This is ...
base64's user avatar
  • 10.5k
15 votes

Should I be disappointed with my investment returns?

Unfortunately, yes, I think I would be disappointed. For an investment that grows from $46,000 to $58,000 in 10 years, the Compound Annual Growth Rate (CAGR) is 2.35%. The CAGR of the S&P 500 ...
Ben Miller's user avatar
  • 116k
14 votes
Accepted

Why do people claim that Stock Markets are broadly exponential in the long term?

The main problem is that indexes like the FTSE only show growth in share price. The FTSE 100 is, by definition large companies, and most of those would be regarded as dividend rather than growth ...
richardb's user avatar
  • 1,940
14 votes

Why isn't there a universal investment standard/benchmark?

"Why is it easy to set a standardized scoring metric for golf, and not for investments?" Because golf is a sport standardized by various sporting bodies, to the extent that those bodies ...
Grade 'Eh' Bacon's user avatar
13 votes

How to maintain NAV (Net Asset Value) for family fund

This is working fine for tracking purpose, however, now I have a need where multiple family members would invest (add funds) and the NAV is calculated accordingly. Next, when any of the family member ...
mhoran_psprep's user avatar
12 votes

Does investing in the S&P 500 for 3 years yield better yearly returns than investing for 15 years?

It depends which 3 years (and which 15). If you had bought the S&P500 index fund in the 2004-2005 time range, your 3 year returns would be small, nothing, or even negative, depending on how ...
yoozer8's user avatar
  • 9,513
10 votes
Accepted

Shouldn't a Roth IRA accumulate more than 1 cent of interest per month?

The term 'interest' tends to be used loosely when discussing valuation of stocks. Especially when referring to IRAs which are generally the purvey of common-folk who aren't in the finance industry. ...
Andy's user avatar
  • 1,448
10 votes

Does investing in the S&P 500 for 3 years yield better yearly returns than investing for 15 years?

"the average return for 3, 5, 10, 15 years is 9%, 8%, 13% and 7.6% respectively" I suspect this really means that the returns using the S&P average over the previous 3, 5, 10, 15 years is … . ...
Ray Butterworth's user avatar
10 votes

Rate of return on an Life Insurance Annuity

See other answers about annuities They are very much an insurance product; you are paying someone to guarantee you an ongoing income no matter what investments are doing, for your entire life and/or ...
keshlam's user avatar
  • 47.5k
9 votes
Accepted

Is this how to calculate annualized return?

Doesn't that assume I will make 9% on three additional trades? No (well, sort of, but not really). "annualized" doesn't mean "what will my return be in one year". It means "what's the equivalent ...
D Stanley's user avatar
  • 136k
9 votes

How to maintain NAV (Net Asset Value) for family fund

I tried to google but all I can find is NAV associated with Mutual Funds only. Well that's essentially what you're creating so that research may be completely appropriate. You will need to separate ...
D Stanley's user avatar
  • 136k
8 votes
Accepted

Are Certificates of Deposit worth it compared to investing in the stock market?

Another factor to consider, beyond the fact that growth and volatility go together, is that the times when many people will need to liquidate their investments will correlate with the times that many ...
supercat's user avatar
  • 878
8 votes

Calculating returns on a stock: different ways?

The first formula has an error. If you want to find the total return on your initial investment then you should be dividing by the initial investment, not by the total number of shares bought. It ...
Nosrac's user avatar
  • 6,839
8 votes

When investing, is the risk/reward tradeoff linear?

The relationship is not linear, and depends on a lot of factors. The term you're looking for is efficient frontier, the optimal rate of return for a given level of risk. The goal is to be on the ...
kponz's user avatar
  • 943
8 votes

Shouldn't a Roth IRA accumulate more than 1 cent of interest per month?

There are a couple of misconceptions I think are present here: Firstly, when people say "interest", usually that implies a lower-risk investment, like a government bond or a money market fund. Some ...
Grade 'Eh' Bacon's user avatar
8 votes
Accepted

What is the difference between Rate of Return and Return on Investment?

ROI (Return on Investment) is a simple percentage. https://investinganswers.com/financial-dictionary/technical-analysis/return-investment-roi-1100 The return on investment formula is: ROI = (Net ...
RonJohn's user avatar
  • 50.7k
8 votes
Accepted

Two investments with same % returns but different dollar returns

This is a basic arithmetic. If investment A and investment B both provide a 20% return and investment A provides 4 times the dollar return than B then one must invest 4 times as much in A. Given ...
Bob Baerker's user avatar
  • 76.6k
7 votes
Accepted

Real Estate: Why does the maximum compound gain happen somewhere in the middle of the mortgage term?

What you are not considering here is the financial leveraging of the equity-based gain. Leveraging refers to the fact that using loaned money to invest, increases the punch of your equity dollars. As ...
Grade 'Eh' Bacon's user avatar
7 votes
Accepted

How to calculate quarterly returns from monthly?

The calculation is product. Given monthly returns X%, Y%, Z%, quarterly return Q% is calculated as: Q% = ((1 + X%/100) * (1 + Y%/100) * (1 + Z%/100) - 1) * 100% Using the numbers from the question: ...
void_ptr's user avatar
  • 3,128
6 votes
Accepted

Accepting high volatility for high long-term returns

This is basically what financial advisers have been saying for years...that you should invest in higher risk securities when you are young and lower risk securities when you get older. However, ...
farnsy's user avatar
  • 15.1k
6 votes

"Rule of 72" For Higher Multiples?

For 3X, it's about 114, and for 4X, 144, which naturally, is twice 72. These are close, back of napkin, results. With smart phone apps offering scientific calculators, you should get comfortable ...
JTP - Apologise to Monica's user avatar
6 votes
Accepted

How are average annual returns calculated on an index fund?

The reported returns include the growth of the fund, not just the dividend yield. These are approximate numbers, but suppose the fund opened at $13.16 per share on Jan 1, 2016, and by Dec 31, 2016 it ...
Paul's user avatar
  • 646
6 votes
Accepted

Can money work that hard for you?

TL;DR - yes, any assumption north of 10% is a too good to be true scenario. The US stock market, as measured by the S&P, has returned 10.51% CAGR. But, there was a standard deviation of 19.61% ...
JTP - Apologise to Monica's user avatar
6 votes
Accepted

Would high interest rates offset the issue of keeping money in a weak currency?

So would it be better for me to keep the money in South Africa or would the interest gains be wiped out by the fact the Rand gets weaker by the year, and therefore would be better for me to transfer ...
Dheer's user avatar
  • 57.1k

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