Hello everyone, today we first get to know the holding period return. Simply put, it is the ratio of the money you earn from holding an investment from the time you buy it to the time you sell it to your initial investment.
The return here includes two parts: the dividends or interest received during the holding period, and the difference you make when you sell it compared to the purchase price.
For example, if you buy a stock, hold it for half a year and then sell it, the dividends of these six months plus the increase in the stock price, divided by the money you initially spent on buying the stock, is the holding period return for this period.
Let's calculate the HPR for this example. The total return is five dollars in dividends plus fifteen dollars in price appreciation, which equals twenty dollars. Dividing by the initial investment of one hundred dollars gives us an HPR of twenty percent.
In summary, HPR is a fundamental measure that helps investors evaluate the performance of their investments by considering both income received and capital appreciation over the holding period. This makes it a comprehensive tool for investment analysis.