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Don’t Let Your Investment’s Rate Of Return Fool You

The investments’ rate of return is the parameter through which you can judge how well or bad your investment has fared. Majority of investors lose their hard-earned dollars in the stock market due to lack of fundamental knowledge about company’s rate of returns.

The rate of return on investments varies as per the type of asset and commodities.

Don’t Let Your Investment’s Rate Of Return Fool You
Various assets such as gold, equity, bonds, and real estate yield rate of returns as per their performance and nature.

Analyzing good rate of returns
As an investor, you expect a good rate of return on your investment. It is easy to be swayed away when someone offers a good rate of return if you invest a certain amount. One thing you as an investor should keep in mind is that no company guarantees a certain rate of return. All returns on investments are subject to market conditions.

Sometimes companies, in order to promote their stocks or raise their stock prices, spread rumors in the market about any bulk orders or acquisition. It makes it difficult for you to predict what should be your next move.

You need to accept that when you invest in a company, you can make profits as well as losses. A $50 stock can give you returns of 10% in a year, however, if the stock fluctuates, it can go at a loss too.

Can a rate of return on investments be manipulated?
It is not impossible to spot anything suspicious when a particular stock shows a lot of fluctuation or is volatile beyond reasoning. As an investor, one needs to look for signs that indicate huge selling. This is a technique used by companies to bring down the stock prices so that investors panic and start selling the stocks. Companies can later buyback these stocks at a lower price.

Often you must have heard promoters claiming that a particular stock is going to outperform and beat all market expectations. However, nothing of that sort happens, and investors in hopes of more returns buy a particular stock in bulk. This mainly happens in the case of penny stocks, where promoters strive to push the stock. Understanding the stock fundamental is necessary. A stock purchased at $20 can merely be inflated by showing profits of 50% over the year. However, this profit also includes transaction fees and taxes. By not accounting transaction costs, the company can mislead you.

Comparing historical rates of the stock over the years can give you a detailed idea about the health of the company. It is definitely not good news for you when there are miscalculations in the rate of returns on your investment.

Investment markets do not run on emotions. The lesson learned from these investment techniques is that one should never invest simply by keeping in mind the short-term returns and profits. It is important to conduct an extensive research about the company, check the technical charts, and compare the rate of return for the past years.

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