Financial Terms
Do you know what financial terms actually mean? Many people don’t even know the basic financial terms. Here I will teach you what it means in layman terms.
When I meet people, most are keen to know about investments. This is fair since most people want their to grow their money. The common question I get is, “How much is the rate of return?” This is a fair question and I’m sure you would ask anyone who sells a financial product. Be in a property, unit trust, REIT or any investment for that matter.
What almost nobody asks is whether the returns are net or gross returns!! It makes a huge difference between net or gross returns. The other question most people don’t ask is, “returns on what??
So in case you do not know, here is a brief example.
For example, let’s say you invest $10,000 and assuming that there are no charges of any kind, then, if the expected return is 9%, then at the end of 1 year, you are supposed to get $900. But many investment vehicles carries charges like brokerage, sales, stamping and service charge. If the total charge of say $200 is incurred, your net returns is actually 7% and the gross return is 9%. If you did not clarify, then, it is correct to say 9%, without mentioning whether it is gross or net.
Therefore, you must educate yourself on what financial terms mean, otherwise, nobody can protect you from your ignorance.