List of concepts frequently referenced throughout the blog.
A comfort book is a book that, whenever it is re-read, transports you to moments of calm in your own life.
Total Return Index (TRI)
The Total Return Index (TRI) is a financial index that shows how well an investment is doing by considering both changes in its price and any income it generates, like dividends.
Unlike regular stock indices (Nifty and Sensex), which only focus on price changes, TRI provides a more complete and accurate picture of your overall return on investment by taking into account both the price changes and any income you receive from your investment (e.g. dividends).
A trailing return, also known as point-to-point return, measures returns between two dates.
Rolling returns are point-to-point returns calculated on a chosen frequency such as daily, weekly, or monthly for a specified period. Instead of focusing on a single fixed period rolling returns look at returns made at various points in time in the past and give a comprehensive picture of a fund’s performance.
Since markets go through ups and downs, rolling returns would tell us how the fund performed through both good and bad periods and make it more indicative of the actual performance of the fund. It would be hard to understand this using the returns of just one period. But calculating rolling returns requires a lot of data crunching making it difficult to calculate.
The expense ratio refers to the percentage of a mutual fund’s total assets that is used to cover the costs associated with managing and operating the fund. It includes various fees, such as management fees, administrative costs, marketing expenses, and other operational charges. These fees are deducted from the fund’s assets, thereby reducing the return to investors.