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Q: Financial Markets ( Answered 5 out of 5 stars,   2 Comments )
Question  
Subject: Financial Markets
Category: Miscellaneous
Asked by: traceyc-ga
List Price: $2.00
Posted: 23 Aug 2004 00:55 PDT
Expires: 22 Sep 2004 00:55 PDT
Question ID: 391315
quity holders receive return on investment in what 2 ways?
Answer  
Subject: Re: Financial Markets
Answered By: vercingatorix-ga on 23 Aug 2004 12:14 PDT
Rated:5 out of 5 stars
 
Stockholders generate returns on their equity investments from two sources.

First, any dividend the stock pays is part of the return. Technically,
the dividend returns can be broken down into two pieces - the current
payout, plus dividend growth.

Second, stocks generate returns when they are sold. This is called a
capital gain or capital loss. While it is common to calculate returns
based on the stock's current value, real returns are not earned unless
the stock is sold. Price increases are considered "paper gains" until
the equity is sold.

Both dividend growth and capital gains tend to follow earnings growth,
though there are any number of stocks that post higher growth but
don't gain in value, or rise in value despite poor profits.

V

Source: Personal knowledge plus http://www.ncpa.org/iss/eco/2002/pd091002e.html

Search strategy: Google search for equity, return, and two
traceyc-ga rated this answer:5 out of 5 stars

Comments  
Subject: Re: Financial Markets
From: ostr-ga on 23 Aug 2004 02:34 PDT
 
1-(possible) increase in the value of equities
2-dividend
Subject: Re: Financial Markets
From: questioncrazy-ga on 06 Dec 2004 16:37 PST
 
I think you left out one important third scenario:
-(possible) decrease in the value of equities

This is possible if the investor sells the stock first, then buy it
back when the value decreases. Most people ignore this growth
structure because they forget that there is no natural reason for
assuming that one must have something in order to sell it (ex:
options? Futures?)

I found this at www.stock-investing-guru.com Nice site, but not too much material.

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