MGT201_Topic127 — Transcript

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1. 0:00This is 127th
2. 0:03module of our course on financial
3. 0:05management.
4. 0:07And we are starting our discussion on
5. 0:09risk and return.
6. 0:12Risk and return
7. 0:14are two concepts
8. 0:16which go together, hand in hand. Yani
9. 0:19risk and return do essay concepts here
10. 0:23jinko alayda alayda samajhna mushkil
11. 0:26hai. Bulky home a ek dusre ki nisbat se
12. 0:29use samajhne ki koshish karni hai.
13. 0:32When we define return,
14. 0:34it is simply the additional amount that
15. 0:38we get on our investment.
16. 0:41When we use the term return, the other
17. 0:44term
18. 0:45that is very obvious and that should be
19. 0:48discussed along with return is
20. 0:51investment.
21. 0:52Investment ka matlab hai ke hum apna
22. 0:55paisa agar kuch waqt ke liye forego kar
23. 0:59dete hai, kisi ko de dete hai, kisi
24. 1:01jagah par invest karte hai,
25. 1:04to uske natije mein hame kuch waqt ke
26. 1:07baad additional amount, additional
27. 1:10return milta hai. And this is what we
28. 1:13say is the concept of return. So, when
29. 1:17we say that
30. 1:19we are earning some return, it means
31. 1:22that we have made some investment.
32. 1:24And the rate of return or the amount of
33. 1:28return is certainly that every investor
34. 1:32would consider.
35. 1:35Ye return ek investor ko kis shakal mein
36. 1:37milta hai?
37. 1:39Uske liye ye zaroori hai ke hum jaane
38. 1:41investment ki kya do bunyadi kisme ho
39. 1:44sakti hai.
40. 1:46One investment may be in what is called
41. 1:50equity. Yani hum kisi business
42. 1:53organization, kisi company ke shares
43. 1:56kharid le
44. 1:57aur us company ke malik ban jaye. As we
45. 2:00know that shareholders are the owners of
46. 2:02a company.
47. 2:03And the other possibility is that we
48. 2:07give a loan or a debt to the company and
49. 2:10we become a debt holder.
50. 2:13A shareholder is also an investor and a
51. 2:17debt holder is also an investor.
52. 2:20How can an individual be a lender to a
53. 2:24corporation or a business organization?
54. 2:28Individuals purchase bonds of the
55. 2:31companies or debt certificates or debt
56. 2:35securities of a company to become
57. 2:38lenders and investors in the form of
58. 2:41debt to the company.
59. 2:55profit uh
60. 2:56And the profit when distributed among
61. 2:59amongst these shareholders, it is called
62. 3:03dividend.
63. 3:11And likewise, the lenders, the bond
64. 3:15holders, the debt security holders,
65. 3:18the return that they get is generically
66. 3:21called interest. So, return uh
67. 3:25additional amount uh
68. 3:30or interest reform uh
69. 3:47the result uncertainty uh no matter
70. 3:51risk means that when we are investing
71. 3:54our money,
72. 3:55how unsure we are that what will be the
73. 4:00return that we'll get?
74. 4:02If we are sure that the rate of return
75. 4:06or the amount of return that we will get
76. 4:09on our investment will be exactly the
77. 4:12same as we have anticipated,
78. 4:16then there is no risk.
79. 4:31But this is not the case whenever we are
80. 4:33making investments, particularly when we
81. 4:36are talking about stock markets and
82. 4:39security markets, capital, and other
83. 4:41types of markets where most of the
84. 4:44investor put their money. So, risk is
85. 4:47uncertainty
86. 4:48of return.
87. 4:50Let's take it a little forward.
88. 4:54When we talk about
89. 4:56risk with reference to investment in
90. 4:58shares and in bonds,
91. 5:01actually, initially, there is an
92. 5:03expectation of return from our
93. 5:05investment.
94. 5:37Expected return on an investment is
95. 5:41actually the average or mean return on
96. 5:44that investment of the past few
97. 5:48years or months or weeks or days even.
98. 5:52And when we talk about risk,
99. 5:55it is the probable deviation
100. 5:59from that expected return.
101. 6:17Because in reality, we cannot be sure
102. 6:20that our expected return or our actual
103. 6:23return both will be the same.
104. 6:25So, the deviation or we can say the
105. 6:28possible deviation or the probable
106. 6:31deviation from our expected return,
107. 6:34which is the mean,
108. 6:36is actually the
109. 6:38risk.
110. 6:39Now,
111. 6:40the last thing that we need to
112. 6:43understand and remember about these two
113. 6:46concepts of risk and return,
114. 6:49that these are directly proportional to
115. 6:52each other.
116. 6:54What is meant by directly proportional?
117. 7:17So, securities where the risk level is
118. 7:20high provide higher return and
119. 7:23securities where the risk level is low
120. 7:26also provide lower return. To conclude
121. 7:30our discussion on this basic concept of
122. 7:32risk and return analysis,
123. 7:35we would say that return is what we get
124. 7:39on our investment. But, the question
125. 7:43that we need to have in our mind is the
126. 7:46year return positive be or something or
127. 7:50you return negative be or something
128. 7:53and that is something which is related
129. 7:56to risk and this is something that we
130. 7:58will discuss in detail in our next
131. 8:01modules.