Well, when you invest a dollar…you hope or even expect to get more than a dollar back. At some point. And let’s say you invested that dollar in Terminator's Closet, a leading dealer in cybernetic body enhancements. And let's say it went from $1 a share to a dollar ten…6 months later.
Nice return. You made 10 percent in just 6 months. But in most investing discussions, investment returns are discussed in the form of annual returns...not monthly or daily or bi-annual numbers.
So you need to convert your 6-month return into an annualized one. You can do the process here of imputing those numbers: that is, if you made 10 percent in SIX months…then in a year, presumably, you could notion that you’d have made 20 percent. It’s not that you are guaranteed to make 20 percent...it's just the math saying that IF YOU HAD COMPOUNDED AT THAT RATE, then you’d have made 20 percent.So what if you made 10 percent in a month? The stock went from a buck a share Jan. 1 to a buck 10 a share by Feb. 1? Using the same math, that month's gain of 10 percent would carry a compound rate of 120 percent on an annualized basis, meaning that at that rate you are more than doubling your money on an annualized return basis.
And that's more than enough dough to keep Terminator's Closet popping out those Wi-Fi-enabled contact lenses faster than people can wear 'em.Related or Semi-related Video
Finance: What is an Annualized Return?36 Views
Finance, a la shmoop. What is an annualized return? Alright people, well
when you invest a dollar you hope or even expect to get more than a dollar [ATM machine]
back, at some point. And let's say you invested that dollar in Terminators
Closet -a leading dealer in cybernetic body enhancements. And it went from $1 a
share to a dollar ten six months later. Alright, nice return.
You made 10% in just six months but in most investing discussions ,investment [spreadsheet shown]
returns are discussed in the form of annual returns, not monthly or daily or
biannual numbers, so you need to convert your six-month return into an annualized [angelic glow]
one, and you can do the process here of computing that number that is if you made
10% in six months well then in a year presumably you could notion that you'd
have made 20%. It's not that you would have guaranteedly made 20% it's just [spreadsheet shown]
the math saying that well if you had compounded at that rate then you'd have
made 20%, so what if she made 10% in a month? Well the stock went from a buck a
share Jan 1 to a buck ten a share by Feb 1 .Well if you impute so that you can [calendar shown]
compute that month's gain of 10% would carry a compound rate of a hundred
twenty percent. Right ? You're multiplying 12 months times 10 there, that'd be
annualizing it meaning, that at that rate you are more than doubling your money on [spreadsheet shown]
an annualized return basis. And that's more than enough dough to keep
terminators closet popping out those Wi-Fi enabled contact lenses faster than [woman watches TV]
people can wear them.
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