CandleFocus

Holding Period Return (Yield)

Candlefocus Editor
Holding period return (HPR), also known as yield, is a metric used to estimate the profitability of a given investment over an extended period of time. HPR is determined by subtracting the cost of the security from the asset's market value at the end of the holding period and then dividing the result by the cost of the investment. Calculated at the holding period’s end, holding period return (HPR) is important for investors to consider as it gives an indication of the total return that the investment produced over the stated duration.

It is important to note that HPR does not take into account dividends or any other form of income generated by the asset during the period which must be included when calculating the overall return on investment. HPR is best used to compare investments which have similar features, such as duration, risk, or volatility. It helps investors identify which asset provides the best return within a given period.

An investor should calculate the HPR of an investment at least annually to ensure that the investment remains on track to meet their financial objectives. HPR can also be used to compare investments over multiple time periods. For example, an investor could compare HPR of investments over different time intervals, such as three months, one year, five years, and ten years.

HPR is considered to be the more comprehensive measure of return when compared to just looking at the current market value of an investment. Investors looking to determine which investments are the most profitable in the long run should focus on HPR rather than market value in order to make the most informed decision. This can be beneficial for risk management as HPR allows investors to identify opportunities with the potential for more returns and manage portfolios in a way that ensures optimal returns.

Overall, understanding and using HPR is beneficial for investors of all types. It provides investors with an “apples-to-apples” comparison of investments and allows them to make informed decisions regarding their portfolios. Utilizing the power of HPR is a great tool for any investor looking to maximize returns while minimizing risk.

Glossary Index