Course: Investment Planning
Lesson 15: Fundamentals of Derivatives – Futures and Options
Can you please explain what Basis points are and how/why they are generally used?
There are 100 basis points in 1%. Basis points are merely a common method of measuring investment fees or returns. An exchanged-traded fund may charge a management fee of 10 basis points, which would be 1/10 of 1%. A portfolio manager may earn 25 basis points higher than the S&P 500 Index. That just means that the manager earned ¼ of 1% more than the S&P 500 Index return.
Onward and Upward,