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Finance GlossaryCarrying Charge
Carrying Charge
Definition of Carrying Charge
Carrying charge or cost of carry is the money involved in the upkeep or general holding of an asset or financial instrument. Examples of carrying charges include maintenance costs, insurance, and others.
A carrying charge can increase the cost of owning an asset. At times, the cost of carry may exceed the potential returns, in which case an investor must evaluate whether the asset is worth keeping.
A carrying charge can increase the cost of owning an asset. At times, the cost of carry may exceed the potential returns, in which case an investor must evaluate whether the asset is worth keeping.
Related Terms
Technical Indicator
A technical indicator is a tool that uses mathematical calculations based on price, volume, or open interest data to analyse market trends and price behaviour. It helps traders identify potential entry and exit points, momentum shifts, and trend strength. Common indicators include moving averages, RSI, MACD, and Bollinger Bands.
Small Cap Stocks
Small cap stocks are the shares of companies that have a market capitalisation below INR 5,000 crore. Often, these companies have a high growth potential, but tend to be more volatile and riskier compared to large cap stocks. In favourable markets, small cap stocks can deliver impressive returns. However, they tend to react sharply to economic changes. Investors must carefully research and consider their risk tolerance before investing in small cap stocks.
Liquidity Risk
Liquidity Risk is the potential inability of a company to fulfil its debt obligations. It also refers to the lack of liquidity that an equity share of other financial instruments like commodity futures may carry.
Dividend Stripping
Dividend stripping is a strategy of buying a company’s stock days before it announces a dividend and then selling the same stock at a lower price once the current holder is entitled to get the dividend previously announced.
The resulting loss in capital gains is generally offset by the profits from dividends. Dividend stripping was once non-taxable, which made the strategy lucrative for smart investors. However, dividends in India are now subject to tax.
The resulting loss in capital gains is generally offset by the profits from dividends. Dividend stripping was once non-taxable, which made the strategy lucrative for smart investors. However, dividends in India are now subject to tax.
S&P 500
The S&P 500 is a stock market index in the US and tracks 500 of the largest publicly listed companies in the country. The S&P 500 represents a wide range of industries. Often, it is used as a benchmark for the performance of the global equity market. Many investors consider the index as a picture of how the overall US economy is performing. It also reflects the overall market sentiment.
Return on Assets (ROA)
Return on Assets (ROA) is a parameter used to measure the efficiency of a company in using its assets to generate profits. The ROA is calculated by dividing the net income by the total assets. A higher ROA implies the business is optimising the use of its assets, like plants, equipment, or cash, in order to earn money. The ROA metric is particularly useful when analysts compare companies in the same industry.
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