Investment Terms Starting with “R”
1. Return on Investment (ROI)
ROI measures the profit or loss earned on an investment relative to its original cost. It is one of the most widely used investment performance metrics.
Illustration: Investing $1,000 and earning $200 gives an ROI of 20%.
2. Return
Return is the total profit or income generated by an investment over a specific period, including capital gains and dividends.
Illustration: A stock gains 12% in price and pays a 3% dividend, producing a 15% total return.
3. Risk
Risk is the possibility that an investment may lose value or fail to achieve expected returns.
Illustration: Stock prices may decline because of economic uncertainty.
4. Risk Tolerance
Risk tolerance is an investor’s ability and willingness to accept investment losses in pursuit of higher returns.
Illustration: Younger investors often have higher risk tolerance than retirees.
5. Risk Management
Risk management involves identifying, measuring, and reducing potential investment losses.
Illustration: Diversifying across stocks and bonds helps manage portfolio risk.
6. Real Estate Investment
Real estate investment involves purchasing property to earn rental income or capital appreciation.
Illustration: Buying an apartment and renting it to tenants.
7. Real Return
Real return is the investment return after adjusting for inflation.
Illustration: A 10% investment return with 4% inflation produces a 6% real return.
8. Real Interest Rate
The real interest rate equals the nominal interest rate minus inflation.
Illustration: A savings account paying 7% during 3% inflation has a real interest rate of 4%.
9. Rebalancing
Rebalancing is the process of restoring a portfolio to its desired asset allocation.
Illustration: Selling stocks after a market rally and purchasing bonds.
10. Recession
A recession is a period of declining economic activity that often reduces corporate profits and investment returns.
Illustration: Stock markets frequently decline during recessions.
11. Redemption
Redemption is the process of selling or cashing in investment units or securities.
Illustration: Investors redeem mutual fund units to receive cash.
12. Redemption Price
The redemption price is the amount paid when a bond or investment is redeemed.
Illustration: A bond is redeemed at its face value of $1,000.
13. REIT (Real Estate Investment Trust)
A REIT is a company that owns or finances income-producing real estate and distributes most profits to investors.
Illustration: Investors earn rental income through REIT dividends without owning property directly.
14. Revenue
Revenue is the total income generated from selling goods or services before expenses.
Illustration: A company reports annual revenue of $50 million.
15. Return on Equity (ROE)
ROE measures how efficiently a company generates profit from shareholders’ equity.
Illustration: A company earning $2 million with $10 million equity has a 20% ROE.
16. Return on Assets (ROA)
ROA measures how effectively a company uses its assets to generate profit.
Illustration: Investors compare ROA to evaluate management efficiency.
17. Return on Capital Employed (ROCE)
ROCE measures a company’s profitability relative to the capital invested in the business.
Illustration: Higher ROCE generally indicates more efficient use of capital.
18. Resistance Level
A resistance level is a price where selling pressure may prevent further price increases.
Illustration: Traders expect increased selling near previous price highs.
19. Relative Strength Index (RSI)
RSI is a technical indicator that measures the speed and magnitude of price changes to identify overbought or oversold conditions.
Illustration: An RSI above 70 often indicates an overbought market.
20. Risk Premium
A risk premium is the additional return investors expect for taking higher investment risk.
Illustration: Stocks generally offer higher expected returns than government bonds.
21. Rights Issue
A rights issue allows existing shareholders to buy additional company shares at a discounted price.
Illustration: Shareholders purchase new shares before they are offered to the public.
22. Retail Investor
A retail investor is an individual who invests personal money rather than managing institutional funds.
Illustration: A person buying stocks through an online brokerage is a retail investor.
23. Registered Investment Adviser (RIA)
A Registered Investment Adviser provides professional financial advice while acting in clients’ best interests.
Illustration: RIAs help clients build long-term investment portfolios.
24. Risk-Adjusted Return
Risk-adjusted return measures investment performance after considering the amount of risk taken.
Illustration: Two investments earn 10%, but the less risky one has the better risk-adjusted return.
25. Round Lot
A round lot is the standard trading unit, typically 100 shares of stock.
Illustration: Purchasing 100 shares is considered one round lot.
26. Reverse Stock Split
A reverse stock split reduces the number of outstanding shares while increasing the share price proportionally.
Illustration: Every 10 shares become 1 share after a 1-for-10 reverse split.
27. Risk-Free Rate
The risk-free rate is the theoretical return on an investment with virtually no risk, often represented by government Treasury securities.
Illustration: Analysts use the risk-free rate when valuing investments.
28. Recurring Investment
A recurring investment is an automatic investment made at regular intervals.
Illustration: An investor contributes $500 every month to an index fund.
29. Reinvestment
Reinvestment means using investment income such as dividends or interest to purchase additional investments.
Illustration: Dividend payments automatically buy more company shares.
30. Recovery
Recovery is the phase following a recession when economic activity and investment markets begin improving.
Illustration: Corporate earnings and stock prices typically rise during economic recovery.