Measurement of Investment Return
KNOWLEDGE EXPECTED OF: Both CFP® Professionals and QAFPTM Professionals
- Define investment return.
- Define variables that impact the calculation of investment return.
- Amount invested / Face value of investment
- Costs and fees
- Investment income received
- Capital gain / loss
- Compounding period
- Compounding frequency
- Exchange rate
- Explain how each variable used in the calculation of investment return affects investment return.
- Define types of investment returns, such as:
- Effective annual return
- Holding period
- Explain each type of investment return.
- Compare types of investment returns, such as:
- Nominal return versus real return
- Expected return versus realized return
- Geometric return versus arithmetic return
- Dollar-weighted return versus time-weighted return
- Interpret the return calculated for an investment.
- Identify that past performance for any investment is not indicative of future performance.
Glossary of Verbs (mouse over to see definition)
To state exactly the meaning of
To be aware of / to recognize and correctly name / to locate an appropriate resource
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
To note the similarities and differences between two or more things
To determine an approximate value for
To find the value using mathematics
To change from one form or purpose to another
To reach a conclusion or make a judgement through careful study
To give the meaning of / to construe or understand / to translate orally