How to measure the value of your investment decisions

In calculating the 'economic value added' (EVA) of your investment decisions, you can identify those companies which create value from those which destroy it. Tim Bennett reveals what EVA is, how well it works - and where to find the companies that offer the best EVA.

It's easy to forget that every investment decision comes at a price the other ways in which you could have used your money. For example, if you choose to buy shares, then you are sacrificing the chance to put the same money to work in a bank account, a government bond, corporate bond or even at the racetrack.

The fact that few investors pay attention to this 'opportunity cost' allows many company directors to get away with murder. They proudly cite the returns from projects or acquisitions that a firm has undertaken, with no mention of what those cost in terms of the debt and equity capital committed.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.