| People with money want a high ROI on their | | | | The lesson here is that getting the most for your |
| invested capital. What that entails differs if you | | | | money as in investor means getting as good a |
| are an investor rather than a small business | | | | gain as you possibly can in the shortest time |
| owner. The small business owner needs to | | | | period possible. If I may indulge in metaphor - in |
| manage his business to achieve a high ROI. A | | | | an improv theatrical performance you have to |
| savvy investor on the other hand wants to get | | | | know when the scene is over. Likewise in |
| as much gain from his or her investment as | | | | investing, you have to accurately judge when |
| possible while minimizing risk. I am an investor. | | | | your money isn't working for you anymore - that |
| One area where investors frequently make | | | | you can make money faster by holding another |
| mistakes and find themselves getting burned is by | | | | security rather than the one you've got currently. |
| ignoring the holding period return. While Jane and | | | | Having said that, it is rare in today's investing |
| Joe might each earn a high ROI on a given stock | | | | world where a shareholder who buys a security |
| trade - say 20% - did they both perform equally? | | | | and holds it long term outperforms a person |
| Not if they held the stock for different periods of | | | | managing his or her holding period return. It only |
| time. If Jane held her stock for two weeks and | | | | stands to reason - managing investment risk |
| made 20% while Joe had to hold his for an entire | | | | means putting your hard earned money at risk |
| year, who had the better investment | | | | for the shortest possible time and achieving a high |
| performance? | | | | ROI for the time you've risked your funds. |