Learning from Berkshire

This educational tool is free to use without an account. Change one input at a time, compare results and read the example and assumptions below. Results are illustrations, not forecasts or personal offers.

Risk is the possibility that the outcome will be different from expected, including loss.

Educational calculators only. Assumptions are not a quote or financing approval.

Using the result

Start with fictional amounts that are easy to check without a calculator. Write down the inputs and the first result, then change just one assumption. This helps you identify what caused the difference instead of changing several factors together. Check whether amounts are monthly or annual, which currency is used and which costs are included. Two decimal places do not make an assumption certain. Finally, explain the result in your own words, identify missing information and note what you would need to verify before using real money.

Explanation and example

Investments with higher potential returns often carry higher risk. Money held without change in the number of shekels is also exposed to erosion of purchasing power. It is important to understand when you will need the money and how much uncertainty you can bear.

Practice example

Money for a trip in a week serves a different purpose than money for a distant goal.

Two imaginary portfolios start at 1,000. One scenario ends at 900 and another at 600: losses of 10% and 40%. The same starting amount does not imply the same risk. Also ask when the money is needed and whether the asset can be sold at that time. Write three scenarios, including an unfavorable one, and identify which assumption changes between them. These are exercises, not forecasts.

Describe a near-term goal and a distant goal and think about why time matters.

Check your understanding

A promise of high returns with no risk sounds...

What is important to find out before investing?

Full lesson