Rate of return on a portfolio
A rate of return on a portfolio is like counting how much money you made or lost from your piggy bank with all the money in it.
Imagine you had 5 toys in your toy box and you decided to sell them to your friends. You sold each toy for a different price and kept track of how much money you made. If you add up all the money you made and divide it by the amount of money you spent on the toys in the first place, that's your rate of return.
Similarly, when you invest your money in a bunch of different things, like stocks or bonds, you want to know how well your investment is doing. The rate of return helps you understand if your investment is making you money or losing you money.
For example, if you invest $100 in a group of stocks and over time they grow to become worth $120, that means you made a profit of $20. If you divide that by your initial investment of $100, you get a rate of return of 20%. That means your investment grew by 20% over time!
The rate of return is important because it helps you make decisions about your money. You can compare the rate of return on different investments to see which one is doing better, and then decide which investment you want to keep or sell.
Imagine you had 5 toys in your toy box and you decided to sell them to your friends. You sold each toy for a different price and kept track of how much money you made. If you add up all the money you made and divide it by the amount of money you spent on the toys in the first place, that's your rate of return.
Similarly, when you invest your money in a bunch of different things, like stocks or bonds, you want to know how well your investment is doing. The rate of return helps you understand if your investment is making you money or losing you money.
For example, if you invest $100 in a group of stocks and over time they grow to become worth $120, that means you made a profit of $20. If you divide that by your initial investment of $100, you get a rate of return of 20%. That means your investment grew by 20% over time!
The rate of return is important because it helps you make decisions about your money. You can compare the rate of return on different investments to see which one is doing better, and then decide which investment you want to keep or sell.
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