Types of Financial ReturnsLocked: included in All Access

What different assets, instruments and indicators actually return: price return and capital distributions, currency effects on foreign investments, long-run returns across asset classes, systematic and unsystematic risk, and how asset allocation shapes the mix of returns.

1. 1. Price return and capital distributionsEvery financial asset pays its owner through a price change, a capital distribution, or both, and the mix depends on what kind of asset or instrument it is.Locked: included in All Access13 min
2. 2. Returns on financial indicatorsInterest rates, exchange rates and market indexes produce no cash of their own, yet they are the yardsticks against which the returns on assets and instruments are measured.Locked: included in All Access13 min
3. 3. Foreign investments and home-currency returnsA foreign investment earns two returns that compound together: the return on the asset in its own currency and the return on that currency against the investor's home currency.Locked: included in All Access12 min
4. 4. Long-term returns across asset classesOver long periods equities have earned the most, mainly through price appreciation, while bonds have earned less, mainly through coupons, and bills have barely beaten inflation.Locked: included in All Access13 min
5. 5. Systematic risk, unsystematic risk and the risk-return trade-offRisk is the gap between expected and realised returns; part of it is economy-wide and cannot be diversified away, and investors demand higher expected returns for bearing more of it.Locked: included in All Access13 min
6. 6. Asset allocation and the mix of returnsA portfolio's return, and its split between price appreciation and distributions, is the weighted average of its assets' returns, so the allocation chosen sets both how much an investor earns and how.Locked: included in All Access11 min