Returns and risk
Read performance correctly and understand what the headline return leaves out.
Browse the full library →How Compound Returns Work
Compounding means each period’s return applies to the value left by earlier periods. Multi-period investment returns multiply together; they usually cannot be found by simply adding the percentages.
Concept explained · BeginnerPrice Return vs. Total Return
Price return measures the change in an investment’s price. Total return also accounts for distributions such as dividends or interest under a stated methodology. Neither number is complete without its period and assumptions.
Concept explained · BeginnerPercentages, Points and Basis Points
A percentage expresses a proportion or relative change. A percentage point measures the difference between two percentages. A basis point is one hundredth of a percentage point. These units describe different calculations.
Concept explained · BeginnerWhat Is Volatility?
Volatility describes how much a measured price or return series varies. It is one way to describe uncertainty in market movements, but it does not capture every form of investment risk or predict the next move.
Concept explained · BeginnerWhat Is a Drawdown?
A drawdown measures a decline from a previous peak to a later value. Maximum drawdown is the largest such peak-to-trough decline within a specified history. Its size depends on the series, dates and measurement frequency.
Concept explained · BeginnerRisk and Expected Return
Expected return is an estimate of possible future outcomes, often summarized as a probability-weighted average. Investors may require compensation for taking risk, but taking more risk does not guarantee receiving a higher return.