What Skills Do You Need To Be Rich?(3)

The next step is to compare two investment opportunities (or more of them).

There are basically several parameters involved.

The main parameter is Return rate and it means how much return will I get after certain period of time (usually after one year).

It is usually calculated as a percentage of the invested amount.

The greater percentage means better results.

For example, Return rate of 10% means that if you invest 1000$, after one year you will have 1000$+1000$*10%=1100$.


It is also important to know how risky is a certain investment.

This parameter can be also calculated an is usually called the risk (quite obvious, isn't it).

Risk or volatility is calculated as a Standard deviation of Price history.

Standard deviation is a measure of how far are the members of the sample from the average of the sample.

More about Standard deviation you can find on http://en.wikipedia.org/wiki/Standard_deviation.

It might look horrible, but you can calculate it quickly using some spreadsheet program.



By Zoran Maksimovic