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What are Basis Points, Bips and BPS?

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What are basis points, bps or “bips” in finance and investing?

Basis points are a finance way for saying percentages or percentage points. For most of us saying “basis points” is really a useless term and just makes finance more confusing.

However, once you can get your head around the meaning of it, it’s pretty straightforward.

What Are They Used For?

Basis points and percentages are often used to quote:

  • Interest rates (e.g. on a deposit or loan from a bank), abd
  • Returns (e.g. investing returns)

This table explains basis points to percentages: 

Basis pointsPercentage

How to convert from basis points to a percentage

If you want to convert, for example, 10 basis points to percentages, simply divide the number of basis points by 100 and put a ‘%’ symbol behind the number.

e.g. 10/100 = 0.1%.

What is a ‘Bip’?

A ‘bip’ is just one basis point.

For example, Joey says to you, “ABC managed fund rose 1 ‘bip’ in January”. That means the fund rose 0.01% or 1 basis point.

Too easy?

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Owen Raszkiewicz

Owen Raszkiewicz

Owen is the Founder of Rask Australia, Lead Investment Analyst for Rask Invest and head educator at Rask Education. Prior to founding Rask, Owen was an investment analyst at the highly regarded managed funds research business Zenith Investment Partners and a Writer/Analyst for The Motley Fool Australia. Owen’s formal qualifications include a Master of Applied Finance and Master of Financial Planning from Kaplan Professional, Bachelor of Technology (Information Systems) from Swinburne University of Technology, Advanced Diploma of Financial Services (Financial Planning) and Diploma of Mortgage Broking Management. He's also completed level 1 of the Chartered Financial Analyst (CFA) program.

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