Expected return

Okay kiddo, today we are going to learn about something called 'expected return'. Imagine you have a piggy bank, and you want to put some money in it every week. Some weeks, you might put in a lot of money, and some weeks you might put in less money.

Now, let's say you want to know how much money you will have in your piggy bank at the end of the year. You can't be sure how much you'll have because you might put in different amounts of money each week, right?

Well, the 'expected return' is a fancy term for the amount of money you think you will have at the end of the year, based on how much you've put in so far. It's not a guarantee, but it's a good guess based on your past actions.

Now, let's say instead of a piggy bank, we're talking about investing in stocks, which are small pieces of ownership in companies. When people invest in stocks, they hope to make a profit. But sometimes, the stock prices go up and sometimes they go down.

So, when people talk about 'expected return' for investing in stocks, they mean the average amount of money they think they'll make over a certain period of time, based on the historical performance of the stocks they're investing in.

So, just like your piggy bank, it's not a guaranteed amount of money but a good guess based on past information. It's important for people to know the expected return so they can make informed decisions about how much money to invest and for how long.