Most profitable investment- the best options for 2019-2020 + an overview of the advantages / disadvantages of investing in general.

If you have start-up capital, but no idea where to invest it, you have come to the right place.

In today's article, the most profitable investments that are relevant in order for 2019-2020 will be considered. Apart from general schemes earnings, we will consider the key nuances of work in each of the niches. The material will be useful, first of all, for beginners. passive income.

If you are a person with many years of experience, our readers will be very interested to know the opinion of the “business shark” in the comments.

What is investment?

To understand the essence of investment, it is necessary to understand 2 characteristics of work - its quality and quantity. When a person goes to the office every day and spends his energy on any activity, he is not able to earn above a certain bar. Few succeed in reaching the head of a large corporation, therefore, everything rests on the limits of a person’s ability to work and how much he can accomplish in the physical aspect.

More than 90% of the able-bodied population of our country work precisely according to the classical scheme of earnings, which rests on the mental / physical limitations of the individual. Physics is cruel. A person cannot work in several places at the same time, however, if profitable investments come into play, this nuance can be easily bypassed.

Example: A person has a stable job as a sales manager - an 8-hour working day with 1 day off per week. To increase the flow of funds to the family budget, he decides to invest in the development of an online store. He only needs financial part transactions, the rest will be handled by the organizers of this event.

After the store has become untwisted and began to give a stable income, the investor begins to receive a percentage of the proceeds in his pocket. Having recouped the initial expenses, he goes into a plus. Thus, in addition to the manager's salary, a person has an alternative source of income, which is formed without the participation of himself.

One reason for investment- get more money. The more profitable your investment is, the faster you will be able to achieve your goal. If we take into account the development path of countries post-Soviet space, then investing has become not a desire, but a requirement, without which one can not hope for a decent pension. A citizen must learn to take care of himself on his own, only then he can be 100% sure of his financially independent future.

Advantages and disadvantages of investments

Positive sides	Negative sides
Profitable investments are passive income. Perhaps the main advantage of investing, the one that people start investing for, is that private investments bring passive income. An investor spends many times less time and labor on managing his capital than an employee who earns in an active way. IN this case he does not work for money, but money works for him.	A profitable investment is the risk of losing capital. The main disadvantage of investing, of course, are investment risks. By investing his capital somewhere, the investor always runs the risk of losing it, partially or even completely. Even investment asset seems very reliable, there are always risks of capital loss, they are just small.
Profitable investments are an opportunity to diversify income. If an employee receives income, as a rule, from one source - less often from two or three, but no more, then private investment makes it possible to create an unlimited number of sources of income by investing capital in different assets, different financial institutions and different investment instruments. And this is a big plus, because it makes it possible to significantly secure personal or family budget: if income is lost in one source, it will continue to come from other sources.	Profitable investments are non-guaranteed and inconsistent income. In most cases. Of course, there are options when the investor's income is guaranteed, but there are not very many of them. Basically, investors are guided by the predicted income, but it may not be, in addition, in certain periods, private investment can also bring losses. Active earnings in this case gives much more guarantees of income.
A profitable investment is an unlimited income. If active income is always limited by the amount of time and labor that a person can devote to creating it, then in the case of investment passive income there are no such restrictions. Due to reinvestment and compound interest, it tends to grow exponentially.	Profitable investments are constant worries for your money. In any case, for novice investors. Especially if the asset they have acquired begins to fall in price and incur losses, new investors do not find a place for themselves and may even be subjected to serious psychological stress.
Profitable investments are interesting and informative. In fact, investment activity is really very interesting: in the process, the investor learns a lot for himself, improves his financial literacy, gains experience, which will never be superfluous. In this regard, compared to the routine work that many actually hate, private investment wins well.	To invest, you need capital. And for investments to bring income, at least enough to live on it and support a family - capital that is large enough for an ordinary person. It is not so easy to create it, it takes many years.
Profitable investments are an opportunity for self-realization and achievement of goals. As practice shows, it is investors who have the greatest chances to achieve success and set life goals, which, as you know, in the overwhelming majority of cases directly depend on the material component. They are the richest people in the world, country, city. An investor always has a lot of free time, which he can spend on himself and his loved ones, on doing what he likes, on self-realization.	To invest, you need to be good at it. You need to be financially literate and constantly develop and improve your financial literacy. On the one hand, this is good and will never be superfluous, but on the other hand, it takes time and a banal desire, which, unfortunately, many do not have. And without this, private investment becomes a kind of step into the unknown.

If we objectively compare the sides of the same coin, investments are definitely worth the attention of any person who has at least a small amount of free capital. In order to minimize the risk of losing funds, experts recommend always diversifying risks, and of course, do not forget about the "cold mind" when making important decisions.

The most profitable investments of 2019-2020: a detailed overview

We have dealt with the essence of the concept of "investment", now we can proceed to the choice of the most profitable options for investing in current year. Let's say right away that each of the options has risks, however, as they say, "who does not risk does not drink champagne." The probability of going bankrupt in investments depends very much on the type of assets - the more stable it is, the lower the value of this parameter. Further, we will consider each of the investment methods in sections + give recommendations on how to get into a stable plus, keeping the balance on the verge between collapse and high profitability.

1) Investments in deposits: payback + features of earning on banks

Investing in deposits is the easiest option to attach your money to a citizen of our state. It is impossible to call such a method super profitable, however, the interest rate on a person’s investments will drip with minimal risk, and therefore, this method is often used not for the purpose of high earnings, but for the purpose of storing earned funds.

How investments in a bank work on an example:

1. The investor makes an investment for a certain period at 15% per annum.
2. The bank draws up documents and receives at its disposal the investor's money, which can now be used for personal purposes.
3. A banking institution issues a loan corresponding to the size of the investment of the 1st individual, to another person, but the rate, at the same time, is much higher - 20-22%.
4. After 12 months, the owner of the investment withdraws them to a personal account along with 15% per annum, and the bank remains in the black thanks to the resulting difference of 5-7%.
5. Profit.

Naturally, investments at 15% per annum cannot be called profitable, however, banks have another reason why it will be profitable to keep money there - risk insurance for deposits up to 1,400,000 rubles. If financial institution goes bankrupt, the depositor will still receive his investments to his personal account, the problem will be only in the timing of payments.

How to choose a profitable deposit - 6 key selection criteria:

investment period.

The most important indicator for the investor. There are 3 types of deposits, depending on the term - short-term (up to 90 days), medium-term (up to 1 year) and long-term (over 1 year). There are also perpetual investments in the bank, but here there is a clause in the contract that allows you to withdraw funds for one of the specified reasons;

To get a profitable deposit, you need to choose the highest rate from the bank with minimal risk. Although, the system is designed in such a way that the most profitable options rest on long term placement of funds;

percentage regularity.

Once a month / quarter or at the end of the term - 2 options for crediting interest on investments in the bank. If you want to receive dividends stably, choose the 1st option of cooperation;

capitalization.

The most profitable option for investing in banks, since the interest is calculated according to a complex formula, adding dividends to the principal amount of the deposit. With large amounts of investment, this parameter allows you to increase the profitability of the instrument at times;

the possibility of replenishment.

Another bottom chip that makes your investment in the bank more profitable. Good for investors who cannot make a one-time deposit a large sum funds to your bank account;

possibility of withdrawal.

For those who do not know the exact term for placing investments in a bank, it is rational to use term deposits. In this scheme, the investor has the right to withdraw his investment at any time with minimal interest losses.

In order to choose for yourself a profitable investment option in a bank, you need to start searching for institutions only after you decide on the goal and timing of capital placement. In addition to the classic set of requirements and proposals, each Russian bank has its own nuances of cooperation. Studying them before investing is a must.

Most people use investing in a bank as an intermediate step. The main goal is the temporary storage of funds and the leveling of the inflationary impact, which always occurs within the framework of the economy of our country. As soon as the investor finds a more profitable investment option, the money smoothly migrates from one place to another.

2) Investments in mutual funds - the trust of capital in the hands of the pros

This tool ranks second in popularity in Russia for making profitable investments with an average and low level risks. At its core, PIF (share investment fund) is a collective instrument managed by a specialized company in order to increase investments. Mutual fund employees are professional traders who diversify risks and invest the fund's funds in the most profitable areas financial market.

The structure of this financial instrument is based on a share - a unit that reflects the share ratio of the investor's investments in relation to common capital fund. If a person wants to get a profitable investment option, then he will have to buy a share. To return the investment + take the profit, it is enough to write a statement to the administration at any time and indicate the details of the bank account for the transaction of funds.

Types of mutual funds:

open.

The most convenient option for investing your own capital. The purchase of a share takes up to 10 days from the date of application, and its submission is permissible at any time, subject to the availability of free shares in the mutual fund;

interval.

Investments are made only within a certain time frame. The situation is similar with the withdrawal of funds. The financial instrument is more profitable than open-end funds, as it allows you to invest in stocks and other securities with high rates of return. With the best hands, you can even double your own contribution;

closed.

A rare investment option that is used to develop any projects from scratch. An ordinary citizen, in this direction, is better not to invest.

Compared to deposits, mutual funds are a more profitable financial instrument. Even when investing in the least risky assets (bonds), the investor's earnings can exceed 20%. If we take into account the profitability of deposits, then the interest is hardly enough to cover the inflation rate.

How to choose a mutual fund for investment:

1. We form the goals for which a person wants to invest. Calculate the amount, term, risk level and expected return from your event.
2. We choose a Management Company with a high reliability rating - from "A" to "AAA". It is desirable for the management company to reach the top ratings in several parameters (the amount of capital raised, net assets and so on).
3. We analyze the life of the mutual fund. It is unlikely that you can get profitable investments from the management company, which has been operating on the market for only a couple of months. Experience in the management company should start from 3 years.
4. We investigate the yield of mutual funds. Each management company is required to post reports on past quarters. If you see that 95%+ of investments were profitable, then you can safely trust the money.
5. Fund size. Experts believe that the most profitable investments are brought by funds with an average capital size. Small ones charge large commissions to hold the asset management company, while large ones do not have sufficient maneuverability, which can lead to a drop in the investor's investment in the pipe.

If you have found a management company with high performance in all criteria, but at the same time, a large commission, we advise you not to turn your nose, but to make investments, since even with a small overpayment, you will have the stability in income that you get in this line of business very problematic.

3) Investing in stocks - risk and reward

If we consider investments in terms of the level of risk, then shares are the most dangerous asset in this aspect. At the same time, it simply does not turn around to consider securities not profitable - peak earnings successful traders reached 300% per annum. The difference in income level is noticeable even for small investors with a starting capital of a couple of tens of thousands of rubles.

A share is a security that gives its owner the right to participate in the profits of the company that distributes it. According to the form of issue, cash and non-documentary securities are distinguished, and in relation to the type - registered and bearer.

Types of shares by the nature of dividends:

The most popular profitable investment option among Americans. In Russia, this type of asset is less popular, as it is accompanied by risks above the average level. The main income from ordinary shares is dividends. With regard to the managerial aspect, the right to vote in general meetings shareholders;

privileged.

More profitable investments that give fixed dividends to the investor, while the owners of the asset are obliged to pay preference shares Firstly. This approach to the organization of payments, gives confidence in the return on investment, even with a high level of risk.

Ordinary citizens of our country can make investments only in open joint-stock companies. Only a predetermined circle of individuals/legal entities has access to closed communities. If you want a profitable investment in the long term, be prepared to shell out substantial money to buy big-name assets such as Gazprom, Apple, and the like.

4) Investments in the Forex market

It should be understood that Forex is not a type of profitable investment, but a complex system for managing financial assets, namely, currency pairs. If we look at an example, then the easiest way is to draw an analogy with the jumps in the exchange rate for foreign exchange market. For example, a person buys 10 euros for 9.5 dollars and, after some time, sells the same 10 euros at a more profitable price of 11 dollars. Of course, this alignment is far from reality, but you get the point.

Features of investments with Forex:

• the market operates 24/7, and therefore, a person can receive income at any convenient time;
• investing in Forex cannot be called a completely passive way of earning money, since without the participation of a management company or private traders, you will have to deal with speculative trading on your own, and this is not always realistic if we take the skills of the investor as a basis;
• Forex is a profitable investment due to the ability to earn income both when the market rises and when it falls.

The annual return on investments in Forex is up to 150%, however, despite such a tempting indicator, few Russians want to get involved in this adventure, and it is not surprising, because according to statistics, about 93% of investors lose their deposit during the first year work.

In order not to burn out on Forex, an investor can go in 2 ways - spend a couple of months on training with trading practice, or entrust their investments to another trader. The second case should be considered through PAMM accounts. You can read more about this financial instrument in other articles on our website.

5) Profitable investments with bonds - is it real?

In the financial world, bonds are IOUs large companies. The essence of this asset is for the organization to borrow a certain amount of funds from external investors for fixed term. Due to the stability and convenient payment system, bonds are not only a profitable investment, but also a quality alternative to deposits or mutual funds.

There are a lot of classifications of bonds - by maturity, ownership, form of loan, type, and so on. The most stable for investments are government bonds (from the Bank of Russia). In second place are the municipalities. In terms of profitability, the leading positions are held by foreign and corporate issue papers.

According to the form of payment of earnings, bonds are divided into:

with a fixed rate.

A person can calculate in advance the income from such deposits. Interest is paid periodically - 1-2 times a year. For example, a bond at a price of 100 rubles with a rate of 20%, in 5 years will bring its owner the same amount from above, thereby doubling the investor's starting capital;

floating rate.

The percentage is tied to some financial indicator, for example, the refinancing rate. Accrual of income, in this case, will occur at the end of each calendar year, until the change in the refinancing rate;

mixed.

They are a combination of the previous two indicators. For example, half of the term is calculated at a fixed rate, and half at a floating rate;

discount.

Less profitable investment, as the profitability is formed due to the difference in price. Feature - the purchase of a bond is made at a cost that is lower than the nominal at the current moment.

If we compare bonds with stocks, then the latter are considered more profitable investments, however, in terms of the stability of payments and the risk of loss, the leadership undoubtedly belongs to IOUs. By investing in bonds, a person becomes a kind of lender who lends money legal entity under a certain percentage. Even if the company has problems, it will in no way be reflected in the amount of your final income. Shares, on the contrary, directly depend on the state of affairs in the market - if their value has fallen sharply, the investor risks going into a huge loss.

6) Investing in OFBU - an alternative to mutual funds from banks

Trust management of investments is a very popular area of ​​activity both among private traders and management companies, which can be banking institutions themselves. It is impossible to call OFBU extremely profitable investments, but their potential is much higher than that of classical bank deposits. It is provided due to the variability of assets in which an investor can invest - securities, currency, precious metals, options, futures, and the like.

The essence of investing in OFBU is to provide the fund with its own assets for trust management. In return, the investor receives a certificate in his hands, which is a confirmation of ownership of a share in the common pool of investments. Making such a deposit for 2019 is not a problem - the service is provided by more than 70% of banking institutions in our country.

Benefits of investing in OFBU:

• the owner of the capital will be able to make fairly profitable investments due to the wide variety in the choice of assets. Foreign securities will allow you to receive up to 20% per year, which is 2 times more than ordinary interest rates in bank deposits;
• the profitability of investments is negotiated in advance, and, after signing the contract, remains unchanged until the moment of settlement between the management fund and the investor;
• the investor has the right to independently control the state of his share of assets in the fund. Implemented this moment through the study of reporting, which is supplied to the investor by the management company.

The key risk of investing in OFBUs is poor management by management companies. Only with the skillful use of trading skills, the trader will be able to realize the expectations of the investor and bring him real income. Payments from investments are made according to 2 schemes - a percentage of the share immediately and a percentage of the investor's share. In the second case, the profit is accrued at the end of the term.

From year to year, the profitability of OFBU, mutual funds and deposits jumps, therefore, it is impossible to say which investments are profitable and which are not. You should follow the news of the financial world and make only medium-term deposits for a period of 6-12 months. Thus, it will be possible to adjust the directions of investment, choosing only those that bring the greatest income at the moment or in the near future.

Where to invest little money in 2019 to save and earn?

7) Investments in precious metals

The main question that an investor working with precious metals will have is where to buy an asset? The safest and, at the same time, profitable investment option is a bank or a secured large Management Company. Percentage accruals for drago precious metals in banking institutions is small - 2-4%, however, if you convert this indicator in rubles, you can get up to 30% per annum, depending on the level of growth in the value of the asset during the year.

It's so usual that for the citizens of our country, gold is a sign of stability, therefore, in a crisis, most of the country's major investors overtake their assets from all the variable financial sources in this precious metal. The goal is to ride out the crisis and save equity no loss. In the order of 2019, the price of gold is growing, therefore, investments in it are now very profitable. It is difficult to predict the duration of such a rise, therefore, we advise you to withdraw capital from precious assets at the first sign of improvement economic situation in the country.

Ways to invest in gold and other precious metals:

investing in gold bars.

In the banks of Russia you can find ingots of gold, silver and platinum of the highest standard with impurities of no more than 0.01%. Packaging by weight starts with 1 gram and ends with 1 kilogram.

You can store precious metal both in your own “under the mattress” and in the same bank where the person bought the asset. The right to own an ingot is confirmed through the issuance of a certificate. If the document is lost, the banking institution may refuse to accept the ingot back and convert it to fiat;

investment in gold coins.

This asset has not only financial value, but also collectible. In Russia, coins are minted dedicated to some significant events. Their sale / purchase can cost much more than their face value, therefore, in some cases, buying a rare gold coin can be a very profitable investment;

precious metal accounts.

There are 2 types of such accounts - SOH and CHI. The bottom line is that the depositor gives the bullion for storage to the bank and receives interest from them on a convertible currency account.

A person can replenish his deposit both through the usual currency and metals, however, it is precisely a precious metal. COX works differently - the depositor, on the contrary, pays for the storage of ingots. For those who are looking for profitable investments, it is worth considering only CHI.

There is another method of investing in gold − gold-backed securities. Only the World Gold Council has the right to issue such securities. To make a profitable investment in such an asset, you will have to spend more than one week on the London or American stock exchange because the demand for this product is incredibly high.

In addition to the agreed list, there are other investment options - hedge funds, real estate, endowment insurance life and so on. All of them are difficult in understanding the depositor + do not have good performance financial return. If there is a desire to quickly advance in economic world, choose only the most profitable investments, well, do not forget about risk diversification, since working with a single asset is suicide.

Investing in various assets is one of the most popular types of earnings. However, it requires enough high level financial literacy. For successful investment it is necessary not only to make the right investment decisions, but also to be able to evaluate the results of investing. This will allow you to make a qualitative analysis and, if necessary, make timely changes to it. This approach to investment activity increase its efficiency, and hence the income of the investor. The main indicator of any investment is the return on investment. What it is and how to calculate it will be discussed in this article.

Types of return on investment

Return on investment is an indicator that reflects the degree of increase in the investor's invested funds over a certain time period. It can be expressed in currency and as a percentage. For this reason, there are two types investment income: percentage and cost.
Interest income is interest accrued on funds invested in deposits, bonds, shares (dividends).
Return on value is the increase in the value of an asset in which an investor has invested their money.
I want to note that some assets combine both types of returns. For example, company shares. can receive dividends and earn on the growth in the value of securities.

Formulas for calculating the return on investment

There are several formulas that can be used to evaluate the effectiveness of an investment. We will consider the most important among them.
The basic yield formula looks like this:
D \u003d (P / SV) x 100%
The profit received from investments (P) is divided by the total amount of funds invested in the asset (CB) and multiplied by 100 percent. If instead of profit there was a loss, then, accordingly, the indicator will have a negative value. However, this formula has a significant drawback. It does not take into account such a parameter as time. If, suppose, the yield was 28%, then it is difficult to evaluate it without taking into account time. If it is obtained in a year, then this is a very good result, and if it is obtained in several years, then the indicator is very low.
In order to take into account the time factor, you need to use a different formula. It defines the return on investment as a percentage per annum. This formula looks like this:
D \u003d (P / SV) x (365 / KD) x 100%
It differs from the previous formula in that we multiply the resulting yield by a time factor. It is determined by dividing the total number of days in a year (365) by the number of days the asset is held. Calculation of yield as a percentage per annum allows you to compare the effectiveness of investments in assets that have different holding times.
At long term investment it will be useful to calculate their average annual returns. This is done according to the formula:

JV is the amount of funds received from the sale of assets;
DV is the cash payments that the investor received during the investment period;
SW - total amount investments;
n is the number of years of holding assets.

In order to choose the most promising among the huge number of investment options on the Internet, investors need universal evaluation criteria. The most obvious one is profitability, a measure of the increase or decrease in the amount of investment over time.

Profitability is measured as a percentage and shows the ratio of profit from to the amount of money invested. It shows not how much specifically the investor has earned, but the effectiveness of investments. When analyzing investment options, investors look at profitability in the first place, often forgetting about possible ones.

I would not write a long article if one formula worked for all cases - there are enough pitfalls when calculating profitability in different cases. In principle, you can not bother and use it for these purposes, but it is still desirable to understand the essence of the issue.

The article talks about common situations related to the return on investment. There will be a lot of 8th grade math, so get ready ;) Happy reading! Content:

What is yield? Formulas for calculating the return on investment

The basic formula for return on investment looks like this:

Investment amount is the initial investment amount plus additional investments (“topping up”). Investment profit may consist of the difference between the purchase and sale price of an asset or the net profit of an investment project. It may also include regular payments for (for example, stock dividends).

If the profit is unknown, but you know initial investment amount And current balance(the amounts of buying and selling an asset are also suitable) - use this formula:

Return on investment measured as a percentage and can serve as a reliable benchmark for comparing the two investment projects. The following example looks very illustrative:

Project A - $1,000 profit per year with an initial investment of $5,000. Yield — 1000$/5000$ = 20%

Project B - $1000 profit per year with an initial investment of $2000. Yield — 1000$/2000$ = 50%

Obviously, project B is more profitable, since it gives more high return on investment, despite the fact that the net profit of the investor is the same - $ 1000. If you increase the amount of investment in project B to $5,000, with a yield of 50% per year, the investor will already earn $2,500.

That is, the profitability clearly shows in which project, other things being equal, the investor will earn more. Therefore, an investor with a limited investment portfolio tries to pick up assets with a higher yield.

Calculation of profitability for several investment periods

In practice, there are often situations when investments work many periods in a row- simple interest (profit is withdrawn after each period) or compound interest (profit) begin to work.

Calculation of return on investment, taking into account inputs and outputs

A task that is more relevant for active web investors - they can shuffle their investment portfolio even more than once a week.

For starters, what is inputs And conclusions? This is any change in the initial investment capital that is not associated with a profit or loss. The simplest example is the monthly replenishment of the investment account from the salary.

Each time you deposit or withdraw funds, the denominator of our yield formula changes - the amount of investments. To calculate the exact return on investments, you need to know the weighted average size of investments, calculate the return on investment, taking into account inputs / outputs, and thus calculate the return. Let's start with profit, the formula will be:

All investment account transactions are usually recorded in special section like "Payment history" or "Transfer history".

How to find out weighted average investment? You need to break the entire investment period into parts, divided by input and output operations. And use the formula:

The Word does not really want to obey and the formula turned out to be clumsy in appearance. Let me explain it on my fingers - we consider the “working” amount of investments in each of the periods between input and output operations and multiply it by the length of the period (in days / weeks / months) that this amount has worked. After that, add everything up and divide by the total length of the period that interests you.

Let's now see how it works with an example:

The investor has invested $1000 in an investment vehicle. After 4 months, the investor decided to add another $300. After another 6 months, the investor needed money, he withdrew $200. At the end of the year, the investment account reached $1,500. What is the profitability of the investment instrument?

Step 1 - calculate the received investment profit:

Profit = ($1500 + $200) - ($1000 + $300) = $400

Step 2 - calculate the weighted average size of investments:

Investment amount = (4*1000$ + 6*(1000$+300$) + 2*(1000$+300$-200$))/12 = (4000$+7800$+2200$)/12 = 1166.67$

Step 3 - calculate the profitability:

Yield = (400$/1166.67$) * 100% = 0.3429 * 100% = 34.29%

And not 50% if we ignored deposits and withdrawals - ($1500 -$1000)/$1000 * 100% = 50%.

Calculation of the average return on investment

Since the profitability of many investment instruments is constantly changing, it is convenient to use some average indicator. allows you to bring fluctuations in profitability to one small number, which is convenient to use for further analysis and comparison with other investment options.

There are two ways to calculate the average return. The first one - by formula compound interest , where we have the amount of the initial investment, the profit received during this time, and we also know the number of investment periods:

The initial investment amount is $5,000. The yield for 12 months was 30% (immediately in the mind we transfer $ 5000 * 30% = $ 1500). What is the average monthly profitability of the project?

Substitute in the formula:

Average Return = (((6500/5000)^1/12) - 1) * 100% = ((1.3^1/12) - 1) * 100% = (1.0221 - 1) * 100% = 0.0221 * 100% = 2.21%

The second method is closer to reality - there are returns for several identical periods, you need to calculate the average. Formula:

The project in the first quarter brought a 10% yield, in the second 20%, in the third -5%, in the fourth 15%. Find out the average profit per quarter.

We substitute:

Average return = (((10%+1)*(20%+1)*(-5%+1)*(15%+1))^(1/4) - 1) * 100% = ((1.1 *1.2*0.95*1.15)^(1/4) - 1) * 100% = (1.0958 - 1) * 100% = 0.0958 * 100% = 9.58%

One of the special cases of calculating the average return is the definition percent per annum, which we encounter at every step in the form of advertisements for bank deposits. Knowing the return on investment for a certain period, we can calculate the annual return using the following formula:

The investor invested $20,000 and earned $2,700 profit in 5 months (round up to 150 days). How much is this in percentage per annum? We substitute:

Yield = ($2700/$20000 * 365/150) * 100% = (0.135 * 2.4333) * 100% = 0.3285 * 100% = 32.85% per annum

Relationship between return and investment risk

The higher the yield, the better, it seems to be obvious. This rule would work well for risk-free assets, but those just don't exist. There is always the possibility of losing part or all of the investment - such is their nature.

Higher returns are much more often achieved through additional increase in risks than due to the higher quality of the instrument itself. This is confirmed by real data - when I conducted Alpari companies, I found a strong relationship between the risk indicator SKO(standard deviation) and return per year:

The x-axis is the return for the year, the y-axis is the standard deviation. The trend line shows that the higher the annual return, the higher the risks of the PAMM account in the form of a TSE indicator.

Yield charts

Yield chart is an indispensable tool for analyzing investment options. It allows you to look not only at the overall result of investments, but also evaluate what is happening in the interval between the events “investing money” and “withdrawing profits”.

There are several types of yield charts. Most often found cumulative yield chart- it shows how much the initial deposit would grow in %, based on returns over several time periods or by results of individual transactions.

This is what the cumulative yield curve looks like:

solandr

It can be used to understand several important things - for example, whether profits grow evenly (the smoother the chart, the better), how big drawdowns (that is, unfixed losses in the investment process) an investor can expect, etc.

I wrote in great detail about the analysis of yield charts in an article about.

Also often used yield charts by week or month:

Chart of the net return of the Stability Dual Turbo PAMM account investor by months

The columns speak for themselves - March was successful, but for the last three months there was no profit at all. If you look only at this graph and do not take into account the older Stability accounts, then you can draw this conclusion - trading system failed and ceased to be profitable. A smart strategy in this case would be to withdraw money and wait until the situation returns to normal.

In general, yield charts and PAMM accounts are a separate interesting story.

Features of calculating the return on investment in PAMM accounts

Let's start with the most obvious - PAMM account profitability charts for all brokers do not correspond to the real profitability of the investor! What we see is the profitability of the PAMM account, that is, the entire amount of investments, including manager's money, And management fee.

When we see numbers like this:

600% in a year and a half, the hand immediately reaches for the "Invest" button, right! However, if we take into account the 29% commission of the manager, then the real return will be as follows:

2 times less! I do not argue, 300% in a year and a half also look great, but it is far from 600%.

Well, if you delve into the essence, then the profitability of a PAMM account is calculated as follows:

• A positive result is reduced by a percentage of the manager's commission, except for the cases in paragraphs 4 and 5.
• A negative result always remains as it is.
• If a positive result is obtained after a loss, it does not decrease due to the commission until the total return reaches a new maximum.
• If, after a positive result, the maximum total profitability is exceeded, the commission is withdrawn only from the part that exceeded the maximum.

As a result, we get a very confused formula, which is necessary for high accuracy of calculations. What should you do if you need to calculate the net return of a PAMM account investor? I suggest using the following algorithm:

1. The total return is calculated according to the formula of return for several periods with reinvestment.
2. A positive result is reduced by a percentage of the manager's commission.
3. A negative result is reduced by a percentage of the manager's commission.

All you need is to multiply the official PAMM account profitability figures by one minus the manager's commission. And not the final result, but the data from the PAMM-account chart (they can be downloaded in Alpari in a convenient form) and calculated using the profitability formula for several periods.

For clarity, look at the same yield graph, calculated in three ways:

The difference with and without the manager's commission is almost 2 times! According to the simplified algorithm, we got a result of 92%, according to the exact one - 89%. The difference is not significant, but for thousands of percent it will become quite noticeable:

The green circles show the moments when the manager's remuneration is paid, the red circles show the reduction of your shares in the PAMM account. What is a share? It's yours share in PAMM account, your piece of the total profit pie.

For understanding, such a comparison is suitable - shares are a certain number of shares in a PAMM account. For these shares, you receive dividends - a percentage of the company's profits. The number of shares decreases - dividends decrease, respectively, and the return on investment.

Why are shares decreasing? The fact is that initially you get a profit on the entire amount of your investment - as you should. The time comes for the payment of the manager's commission - and it is taken from your amount, your "piece of the pie." The piece became smaller with all the consequences.

What I showed you is not bad, it's how it is. This is how PAMM accounts work, and whether to invest or not, the choice is always yours.

Friends, I understand that the article is quite complicated, so if you have any questions - ask them in the comments, I will try to answer. And do not forget to share the article on social networks, this is the best gratitude to the author:

And finally, a wish: invest in really profitable projects!

(Add me in friends

Return on investment on invested capital is determined in several ways, depending on the basis of measurement. Capital can be invested in the real sector of the economy or in the financial sector.

Assessment of return on investment on invested capital in the real sector of the economy

Many investors invest in assets at the same time real sector economy and financial instruments. The tool for analyzing the profitability of such investments are indicators:

• Return on investment ratio (ROI);
• Return on invested capital (ROIC).

The return on investment ratio shows the return on capital invested in the business at the current moment and is regularly assessed in the course of the activity of the invested object.

It is defined as the ratio of the difference in income minus production costs to the total investment in the business as a percentage.

• P - gross income from investments;
• CF - production and circulation costs;
• I - total investment in the business.

The total investment in the business includes equity and long term duties invested object:

Where:

• Wc - equity;
• Wr - long-term liabilities.

This indicator reflects the effectiveness of management investment capital, according to which the investor evaluates the work of the management of the invested object. A positive performance assessment occurs when ROI > 100%, which means that the investment has paid off and is making a profit. The size of this profit and the dynamics of its change serve as an assessment of the effectiveness of the company's activities.

For example:

1. The equity capital of the invested object is 12.5 million rubles and 14 million rubles at the beginning and end of the year.
2. Long-term liabilities, respectively: 2.5 and 4 million rubles.
3. Gross income at the beginning and end of the year amounted to: 65 million rubles and 78 million rubles.
4. Production costs, respectively: 44 and 51 million rubles.

Then ROI, in accordance with formula (1), at the beginning and end of the year will be: 40% and 50%, i.e. the return on investment ratio increased by 10%, which indicates the high efficiency of the company's management.

Another indicator of the return on investment on invested capital is the ROIC (Return On Invested Capital) indicator - translated from English as “return on invested capital”, and in fact, the return on invested capital.

It is defined as the ratio of net profit to the capital invested in the main activity of the investee.

• NOPLAT - net profit cleared of dividend payments;
• Invested Capital - capital invested in the main activity.

In Russian economic terminology, this is an indicator of the return on investment, but only those that are invested in core activities, that is, the return on investment in fixed assets. Fixed capital in this case means fixed assets plus net other assets with an amount working capital for the main activity. A prerequisite for calculating this indicator is that the net profit created only by the capital that is in the denominator of this indicator is taken into account. Sometimes, in case of difficulty in isolating total cost fixed capital and the determination of the profit created by it, they resort to a simplified calculation, dividing all profit by the cost of capital. If the size of non-fixed assets is small, then the error of the indicator will be small and acceptable for analysis, but if this is not the case, then such an indicator cannot be trusted.

This indicator demonstrates to the investor the ability of the management of the investee to generate added value in comparison with other investee objects of the investor. For such assessments, a certain standard is used - the rate of return on investment in a competitive environment.

The rate of return on an investment is the ratio of the return received to the investment that generated that return in percentage terms over a specific period of time.

For example, an investor has three investable objects:

• 1 object at the beginning of the year received net profit in the amount of 32 million rubles, and at the end of the year 43 million rubles, with an invested capital of 30 and 40 million rubles, respectively;
• 2 object at the beginning of the year received a net profit of 50 million rubles, and at the end of the year 53 million rubles, with an invested capital of 45 and 49 million rubles, respectively;
• 3 object at the beginning of the year received a net profit of 12 million rubles, and at the end of the year 13 million rubles, with an invested capital of 6 and 8 million rubles, respectively.

Accordingly, ROIC at the beginning and end of the year:

• for 1 object 106.7% and 107.5%;
• for 2 objects 111% and 108%;
• for 3 objects 150% and 162.5%.

Accordingly, the rate of return is:

• for 1 object 107.5 - 106.7 = 0.8%;
• for 2 objects 108 - 111 = -3%;
• for 3 objects 162.5 - 150 = 12.5%.

If the investor considers the minimum allowable rate of return per 1 ruble of investment to be 10%, then 1 and 2 investment objects do not meet this requirement and the reasons for such a low return on investment should be analyzed, and for the second object an additional analysis of the decrease in investment return is required. If it is impossible to increase the profitability of 1 and 2 investment objects, the investor raises the issue of closing the investment project.

If the analysis of the return on investment is carried out over several years, then cash flows are discounted by the time the profitability is analyzed at the discount rate adopted by the investor.

The disadvantage of this indicator is that management is focused on "squeezing" profits from investments in any way at the current moment, which can lead to a lag in the renewal of production and ultimately lead to a loss of the company's competitiveness.

Estimation of return on investment on invested capital in financial instruments

Return on investment on invested capital in financial assets consists of current and capitalized components.

Current income is defined as the difference between the sale price received at the end of the investment period and the purchase price security.

I = St - So

• I - current investment income;
• So - the purchase price of the security;
• St - income received at the end of the period (year).

For example, an investor purchased 10 shares at a price of 1,000 rubles at the beginning of the year, and at the end of the year, his income from the sale of shares amounted to 11,500 rubles. In this case = 11,500 - 10,000 = 1,500 rubles.

The ratio of current income to invested investments is called the capital gain or interest rate and is expressed by the following formula:

Where rt is the interest rate, and for this investment it is 15%.

Another measure of return on investment financial capital called the relative discount. It is defined as the ratio of current income to income at the end of the period:

Or for our example: dt = 1500 / 11500 * 100 = 13%.

This indicator is also called the discount factor. The interest rate is always greater than the relative discount.

The total return reflects the increase in invested capital for a defined period, taking into account the redemption of the security.

The main indicator used in the analysis of total return is yield to maturity YTM, which is akin to the internal rate of return on an investment, IRR, is the average effective interest rate at which the value of all income received is discounted to the value of the initial investment. Like IRR, this indicator is rather complicated to calculate, but the formula for a simplified calculation of this indicator is presented below:

• YTM - yield to maturity;
• CF - flow of current income from investments;
• Io - initial investment;
• n is the number of periods;
• N - payment to the investor at the end of the period.

For example, purchased 10 shares for 10,000 rubles bring annual income:

• CF = 1500 rubles per year;
• Io = 10,000 rubles;

The capitalization of 10 shares by the end of 3 years amounted to 1,500 rubles:

• N = 11500 rubles;
• n = 3 years.

YTM = 4500+(11500-10000)/3/(11500+10000)/2= 46.5%

Obviously, the yield to maturity is significantly higher interest rate, which allows us to assert the expediency of these investments in a financial instrument.

How to calculate return on investment?— this question interests every investor. The main thing is to generate income, so it is always interesting how much you have earned and what profitability you have. By profitability, stocks, bonds, deposits, real estate and many others are compared. Any investor, trader or manager is interested in its effectiveness. Banks, management companies and brokers, when they advertise their services, like to lure customers high interest. Profitability is one of the most important indicators by which you can evaluate the effectiveness of investments and compare with other investment alternatives. So, let's figure out what is the return on investment and how to calculate it.

Yield(rate of return, level of return) is the degree of increase (or decrease) invested amount for a certain period of time. Unlike income, which is expressed in nominal terms, that is, in rubles, dollars or euros, profitability is expressed as a percentage. Income can be received in two ways:

• interest income is interest on deposits, coupons on bonds, rent real estate;
• an increase in the value of purchased assets - when the sale price of an asset is greater than the purchase price - this is real estate, gold, silver, oil and other commodity assets.

Assets such as real estate, stocks and bonds can combine two sources of income. The calculation of profitability is needed to assess the growth or decline of investments and is a criterion for assessing the effectiveness of investments.

How to calculate return on investment?

IN general view Return is always calculated as profit (or loss) divided by the amount invested multiplied by 100%. Profit is calculated as the amount of the sale of the asset - the amount of the purchase of the asset + the amount cash payments received during the period of ownership of the asset, that is, interest income.

Formula 1

An example of calculating the return on investment.

We bought a share at a price of 100 rubles (investment amount), sold a share at a price of 120 rubles (amount of sale), received 5 rubles of dividends (cash payments) for the period of holding the share. We calculate the yield: (120-100+5)/100 = 0.25 ∗ 100% = 25%.

Formula 2

There is a second formula, according to which the profitability is calculated as the amount of the sale of the asset + the amount of cash payments divided by the amount of investments, minus 1, multiplied by 100%.

Profitability calculation example: (120+5)/100 - 1 ∗ 100% = 25%.

How to calculate the yield as a percentage per annum?

The formula for calculating simple yield does not take into account such an important parameter as time. 25% can be obtained in a month, or even in 5 years. How then is it correct to compare the returns on assets with different holding times? For this, they consider . Yield as a percentage per annum is calculated in order to compare the performance of assets with different holding times with each other. The yield in percent per annum is the yield reduced to a common denominator - the yield for the year.

Eg Bank deposit gives 11% per year, and some shares brought 15% for 1.5 years of ownership, which was more profitable? At first glance, the shares, they brought more profitability. But the investor owned them for half a year more, so their profitability is, as it were, stretched out in time compared to the deposit. Therefore, in order to correctly compare the deposit and shares, the return on shares must be recalculated as a percentage per annum.

To do this, the coefficient 365/T is added to the formula, where T is the number of days the asset is held.

Example of yield calculation:

We bought a share for 100 rubles and sold it 1.5 years later for 115 rubles. 1.5 years is 1.5*365=547 days.

(115-100)/100 ∗ 365/547 ∗ 100% = 10%. In this case, the deposit turned out to be slightly more profitable than shares.

Like forex, management companies, brokers and banks manipulate annual returns.

In any profitability advertisement, pay attention to the footnotes, specify what profitability is indicated in the advertisement and for what period. For example, in advertising sounds a yield of 48% per annum. But it can be obtained in just one month. That is, the company earned 4% per month and now proudly advertises a product that gives 4 * 12 = 48% per annum. Even you, having earned 1% per day on the stock exchange, can brag that you have earned 365% per annum) Only this profitability is virtual.

How to calculate the average annual return

The holding period of assets can be several years. At the same time, most assets do not grow by the same amount. Assets such as stocks can fall or rise by tens or hundreds of percent per year. Therefore, I want to know how much your investments grew on average per year. How then to calculate the average annual return? The average annual return is calculated by taking the root using the formula:

Formula 1

where n is the number of years the asset has been held.

An example of calculating the yield if we owned the stock for 3 years:

3√125/100 — 1 ∗ 100% = 7,72%

Formula 2

Another formula for calculating the average annual return is through exponentiation.

The yield using this formula is very easy to calculate in Excel. To do this, select the DEGREE function, in the Number line enter the quotient 125/100, in the Degree line enter 1/n, where instead of n specify the number of years, add -1 after the brackets.

In the cell, the formula will look like this =POWER(125/100;1/3)-1. To convert a number to a percentage, select the Percent cell format.

How to calculate the average annual return if the annual returns are known?

If the returns of the asset by years are known, then the average annual return can be calculated by multiplying the annual returns and extracting the root from the product to a power equal to the number of years.

First, convert the returns from percentages to numbers.

For example, the first year yield + 20%, the second year -10%, the third year + 30%. In numbers it will be like this: 1.2, 0.9, 1.3. The yield is 3√1.2 * 0.9 * 1.3 - 1 * 100% = 11.9%.

These formulas take into account the effect of compound interest. Simple Formula calculation of profitability does not take this into account and overestimates the profitability, which is not entirely correct.

Now you can calculate the return on your investments not only as a percentage per annum, but also as an average over several years. Next time I will write the correct and very simple way.