Cheetah Advisors Limited

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Discontinued Reports About_Cheetah

Updated 5/10/99

Investment is the process of deploying capital with the expectation of a gain and the return of the original capital in the future. Risk is an integral element of this process. There is the risk of ending up with a gain that falls short of expectation, and then there is the risk of loss of part or all of the original capital.

In today's globalized capital markets, this process has become highly efficient. For taking on an incremental amount of risk, an investor may expect to get a corresponding incremental amount of gain. The base on which this incremental return is measured is commonly referred to as "the risk free rate of return". Most US dollar based investors would use the USD 3-month T-Bill rate (4.57% as at 5/13/99) as a reference point. For instance, over the past 10 years, the incremental return an investor could expect for investing in the S&P 500 Index is 0.85¹ times its risk². In other words, if you expose yourself to a potential loss of 13.9% of your capital (with a 85% chance you will loose less than this) in each of those 10 years, you would have stood to gain 0.85 x 13.9% = 11.8% per year more than the average 3-month T-Bill rate of 5.02%.

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