Six Numbers Every Investor Must Know

Making sense of Return, Risk, Diversification, Valuation, Leverage and Expenses

Investing & Trading
Six Numbers Every Investor Must Know
2 hours
Jun 2022
last update
regular price

What you will learn

Evaluate the risk and return of an investment objectively

Distinguish among the different method of measuring risk

Identify the various approaches used for valuation

Recognise the role that uncorrelated asset classes played in providing enhanced return and diversification

Relate how investment expenses affect return of an investment

Compute the numbers used for measuring risk and return


For many, investment is a subject that is mysterious and quite intimidating. This unfortunate outcome is no coincidence. Many in finance like to speak a different language. The language is intimidating to outsiders. But suppose you want to progress in your career. In that case, you’ll need to engage deeply in investment terminology —it is the language of business, the lifeblood of the economy, and increasingly a dominant force in capitalism.

This course aims to provide you with the most central investing foundation so that you will never find finance intimidating again. Mastering these six numbers won’t make you a financial engineer—there are likely more than enough of those. Instead, internalizing these six numbers will provide the foundation for addressing financial issues with confidence.

This workshop provides the conceptual foundation for understanding the financial markets through these six numbers.

Numbers inform nearly every aspect of our investing lives; the challenge is knowing what to look for and how to interpret them.

These six numbers, if well understood by the practitioners, would make navigating the complex investing world a lot easier.

However, some numbers are more important than others. Sometimes, they prove what we doubt. Sometimes, they discredit what we believe. And on occasion, they permit us to say, “I told you so.” We need only look for them, and they are everywhere. They allow you to understand the context that you are investing in, verify claims made by gurus and take decisive action to benefit your portfolio.

Start breaking away from the novice stage by familiarising these six numbers.

Six numbers every investor must know show you what to look for in Return, Risk, Diversification, Valuation, Leverage and Expenses.

This short course will help participants ask the right questions to guide them in their investment decisions. It is not a blueprint for beating the market but a commonsense approach for understanding the conceptual basics of investing.


#1 - Getting to know the number on Return

How do you compute investment return for your investment
Measuring Return
Return - Core Understanding #1 - The Risk Free Rate
Return - Core Understanding #2 - The Risk Premium
Return - Core Understanding #3 - How to calculate return
The Math of Loss
The Tyranny of Return
Test your understanding on return
Summary for #1 - The Number for Return

Getting to know the number on Risk

Using volatility as a measure of risk
The mismeasurement of risk
Hidden Risk
Value at Risk
It is about risk and return
Test your understanding on Risk
Summary for #2 - The number for Risk

Diversification - The free lunch on Wall Street

Diversification - It may not be intuitive
Low correlation
The concept of low correlation
Does two negatives produce one positive
Which asset allocation produce the highest rate of return? (Refer to last video)
17 Diversification - The free lunch
Diversification - Correlation coefficient
Test your understanding on Diversification
Summary for #3 - The number for Diversification

The number on Valuation

Valuation - The Concept of Hurdle Rate
Intrinsic Approach to Valuation
Relative Approach to Valuation
Asset Based Approach to Valuation
Asset Based Approach to Valuation - Liquidation Value
Test your understanding on Valuation
Summary for #4 - The number for Valuation

The number on Leverage

Introduction to leverage
Understanding the carry trade
Test your understanding on Leverage
Summary for #5 - The number for Leverage

The number on Expense

An Introduction to expense
Types of investment expenses
The Impact of expenses on investment
Test your understanding on Expense
Summary #6 - The number for Expense

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