Return Of The King

The Chinese believes that raising the young is a good hedge against old age. When their children grows up and enters the society, they are expected to take care of their parents, which often includes giving a monthly allowance to their retired parents. This is called filial piety.

Let’s use the example of raising children to discuss a common financial ratio: the Return on Equity (ROE).

You need money to raise children. The money you spend on healthcare, education and food raising a child is called the cost of capital or equity. As with any investment, we expect a return. The return is the money your children give you on an annual basis. If you spent S$200,000 over 20 years to raise a child, your equity in the child is S$200,000.  If your child give you S$10,000 per annum or S$830 a month, your return on equity is 5% (10,000 / 200,000). In the next 20 years, you would have recouped your cost of investment of S$200,000.

Private equity firms are a lot like parents except they don’t get married and have children. Instead, they raise money from people and use that money to acquire private or public companies that offers reasonable and consistent return in the long run.

Adampak (5EZ.SI)

Source: ShareInvestor.com

Source: ShareInvestor.com

Return On Equity at ShareInvestor.com

ShareInvestor.com provides a list of stocks’ Return On Equity via this link for subscribers. Below is a screenshot of the list.

Source: ShareInvestor.com