Is your return expectation 'REAL'?
In the normal course of investment journey, we save money; we select an asset and then we invest. In this process, it is necessary to know the answer of one important question - Why are we investing? So, a basic idea of investing is that we invest money and we get benefit in return and thus we call it as “Return on Investment (ROI)” . First, let us understand what ROI is and how it is measured. Suppose you invest Rs. 1 lakh on which you generate profit of Rs. 10000, so your return on investment is Rs. 10000 and in terms of percentage, your ROI is 10% (i.e. 10000/100000*100). This is how we normally calculate return on investment. Hence, primary and a very simple goal of investing is to earn income or profit. But that’s not all! We further need to know how this return is generated. An investment would generate return over a period of time either in the form of regular cash flows or in form of capital appreciation or both. Regular cash flow is earnings from investment such as dividend, i...