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In: Finance

Explain the concept of return on investment and identify what part it will play in your...

  1. Explain the concept of return on investment and identify what part it will play in your financial plan. You want to answer this in terms of saving and investing accounts with the amount of return you are (or potentially) can earn. and Explain risk vs. reward related to your personal financial goals. You want to look at how things differ when putting money into savings for things like an emergency compared to investing for retirement.

Solutions

Expert Solution

Return on investment is the total rate of return which are made by the investor by investing into different securities for different time horizons.

Investors will always be preferring higher rate of return on the investment because it will help in maximization of their overall wealth through capital appreciation and dividend payments.

It will play an important part in my financial plan because it will help me in order to attain my objective of financial independence in the long run by maximization of my overall wealth through investment.

I will be targeting return on investment which will at more than 10% because it will help me in compounding my overall capital investment in the long run to attain my goal of financial independence and help me in beating the inflation and reduction on principle of time value of money.

There is always a risk versus reward consideration because investors are always analysing the risk before the return and it is often said that the higher amount of risk will be having a potential of earning the higher return.

Putting money into savings for things like emergency funds are also important because they will protect against any adverse situation and it will help the investor in order to protect his overall investment and also protect himself from any adverse environment so, savings in emergency fund along with investment are also important.


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