Economic theorist Irving Fisher first popularized the idea that there is a difference between a nominal interest rate and a real interest rate. Consider a bond that pays a steady coupon rate of 2% for the next 10 years.
If inflation is more than 2%, the real rate of return on that investment is negative. If the investor got taxed on the nominal gains, the real rate of return is pushed further into negative territory.
Long-term investors can obviously benefit by looking at real rate of return in addition to just discount rates or expected rates of return. If a market investment earned 6% over 20 years, but the average inflation rate during that time was 4%, the real rate of return is only 2%.
Inflation rates are determined using price indexes on consumer goods, and this gives investors a sense of how much their money will be worth in the future. Any rate of return is better than none, but stocks are the only asset class that has consistently outpaced inflation historically.
Real rate of return can encourage investors to step outside of their comfort zone, which could be a good thing or a bad thing if they don’t have the risk tolerance for it.
Upgrades and downgrades can be useful but they may not be the most current form of trading information
If you want to buy shares of companies that Warren Buffett is buying, purchase shares of Berkshire Hathaway
The Technology sector consists of companies involved in the research, development, and sale of technology products
In finance, a gearing ratio is a term referring the amount leverage being used, compared to the amount of equity
Earnings are the revenues of the company minus the cost of good sold, expenses, and investment losses
Cash-value life policies can be structured for certain endowment ages, and the company can accelerate the endowment age
You and your spouse could be on the same health plan, especially if it is offered through your employer, COBRA, or...
There are exceptions to this, in the form of no-appraisal mortgages which are available to lower-income homeowners
The Broadening Top pattern forms when a stock price progressively makes higher highs and lower lows following two trends
The Broadening Wedge Descending pattern forms when a stock price makes lower lows and lower highs, forming a downtrend