What Is Stock Compensation?

Stock investment returns are the returns that stock investors get from stock investments. Stock investment returns include risk compensation. Generally speaking: the greater the investment risk, the greater the possibility of investment failure, but once the investment is successful, the return is also large; the investment risk is small, the probability of investment failure is also small, and even if the investment is successful, the return is small. The return on stock investment is calculated according to the following formula: Return rate = (final value of stock-original investment amount + dividend) / original investment amount. ^[1]

Stock investment return

Right!

Stock investment returns are the returns that stock investors get from stock investments. Stock investment returns include risk compensation. Generally speaking: the greater the investment risk, the greater the possibility of investment failure, but once the investment is successful, the return is also large; the investment risk is small, the probability of investment failure is also small, and even if the investment is successful, the return is small. The return on stock investment is calculated according to the following formula: Return rate = (final value of stock-original investment amount + dividend) / original investment amount. ^[1]

For example, an investor purchased a stock in March 1996 with a total investment of 1,000 yuan. In March 1997, he sold all of this stock for 950 yuan. From the surface figures, he lost 50 yuan, which cannot be said that he lost. Because there is another channel to get stock investment returns. Also look at his dividend income during the year. If this year he received a dividend of 140 yuan, then he actually earned a profit of 140-50 = 90 yuan (excluding tax, commission and other factors). In this way, the return on investment of this stock should be:

Calculations show that the investor did not lose money and the return on the stock was 9%. The return on bank deposits is only slightly higher than 5%.

1 Beijing Kangshi Economic Development Research Institute. Small Dictionary of the Stock Market. China Business Press, February 2001, 1st edition.

2 Jiang Jianqing, editor. Encyclopedia of quantitative financial analysis 2. China Finance Press, June 2006. ^[2]