The stock market have been very generous towards investors during the recent years and the S&P 500 index is at its highest levels now. Unfortunately, good past returns do not guarantee good future returns and some market analysts, economists, and investors have started to worry about the yield curve movements. It seems that this topic is extremely popular among market watchers these days, so let's dive into it one more time.

The main purpose of any investment is to generate more money than the amount invested, the time it takes to do so is called the payback period (PBP) in capital budgeting. Payback period is wildly used by investors and entrepreneurs when they consider to open a new enterprise, invest in an existing business, or when they try to pick the best opportunity among two or more possible options.

For many years, the majority of economists based their financial theories on a few basic assumptions: all market participants are perfectly rational (investors aren't emotional at all), and they are also free from any biases or information processing errors. The real-life and practical economy showed that these assumptions don't work in many cases and people tend to behave irrationally from time to time.

All of the major countries’ central banks hold a significant portion of their reserves in foreign currencies. Why do they purchase them and why the U.S. dollar is the most popular reserve currency? Illustration by Eugene A In this article, we'll explain what the reserve currencies are, what purpose do they serve and why the world's central banks hold them.

Alpha (α) and beta (β) are two crucial coefficients that are used for measurement of success of a particular portfolio. Beta represents the volatility of a particular asset (or the whole portfolio) versus the volatility of the benchmark. Illustration by Eugene A In this article, we'll explain what beta is and give a few simple examples to demonstrate how it can be used.

There are two groups of market participants: institutional and retail investors. The majority of market participants aren't small and independent individuals but large institutional investors who manage massive capital. Illustration by Eugene A In this article, we'll explain the difference between institutional and retail investors with some simple examples.

There are two main types of stocks on the public market: common and preferred. Why do we need to have two distinct types of shares and what's the difference between them? Illustration by Eugene A In this article, we'll take a look at these two types of stocks (shares) to figure out which one would be a better choice for an investor.

We all used to recognize companies by their names but there are many other ways to identify a particular company. Every company needs a so-called “ticker symbol” in order to be tradable on a stock exchange. Apple Inc, an American IT giant is also known as “NASDAQ: AAPL” and Nestle SA, a Swiss conglomerate, is also known as “SWX: NESN”.

What is a successful trade? Well, we may say that any trade that generates profit might be considered well executed and it's usually done by buying some asset, waiting for its value to appreciate and then by selling it for a higher price. You buy low and your sell high, that's how most investors make money.

Candlestick price chart in trading and technical analysis is a very common way to visualize price movements. It's relatively easy to understand, it's informative and this type of chart can give some additional helpful hints to a trader that a simple chart can't provide. These charts may look a bit vague for an outsider, for someone who has never traded market securities, and often such a chart can seem confusing, but it's not as complicated to understand as it may seem.

Alpha (α) coefficient in investing is used for measurement of the success of a particular portfolio. Along with beta, the alpha coefficient helps portfolio managers to determine how certain picked assets performed against the market average. Illustration by Eugene A In this article, we'll explain how to use alpha and why is it important for investors.

It's usually justified to be skeptical about financial forecasting, yet most portfolio managers have certain expectations regarding the future rate of return on the investments they make. How does one figure out an expected return of a financial portfolio? Illustration by Eugene A In this article, we'll explain a method that is commonly used to calculate the expected return.

Most of the people can read nowadays (the literacy level is close to 99%), yet reading an annual report of a company is a different story. It can be very confusing for an investor to figure out what are the key things to look after and what information is worth reading.

Stock market technical analysis has many tools, techniques, and indicators that are used for price forecasting but one of them is particularly important: the concept of support and resistance levels. Illustration by Eugene A In this article we'll explain how are those support and resistance levels supposed to work and how can you find them and why are they important.

Elliott wave principle is a fundamental way of analyzing and predicting price trends in technical analysis. Illustration by Eugene A In this article, we'll explain how the Elliott wave principle works in theory and explore why it has been criticized in recent years. What is the Elliott Wave Principle?

Is it trading or investing when someone buys stocks? What's the difference? These two terms still cause confusion so, in this article, we'll explain how investing is different from trading and we'll also provide a few simple examples. Illustration by Eugene A Trading Definition Generally speaking, trading refers to a process when an individual actively engages in market operations (such as buying and selling securities) with the goal of generating returns.

Traders use many strategies to minimize their risks and maximize their returns, but one of them is particularly common and useful: it's the “1% risk rule". Illustration by Eugene A In this article, we'll break down this simple yet effective risk management strategy and show how a portfolio manager can use it in his daily financial operations.

When it comes to trading, people often look at asset prices and analyze its fluctuations with various methods but there is another thing which can tell us a lot about security: its trading volume. Illustration by Eugene A Today we'll explain what trading volume is and how to use it.

Before a company makes its way to the public market, it has to go through a complex and expensive procedure of Initial Public Offering (IPO). Illustration by Eugene A In this article, we'll look at how an IPO usually goes, why is it important, and why many mid-size companies are trying hard to achieve this significant milestone.

When it comes to fundamental analysis of a company, there is one crucial metric that just can't be ignored and it's called EBITDA. It's wildly used by investors, portfolio managers, and market analysts. Illustration by Eugene A Today we'll try to explain what does this metric mean and we'll also provide a few examples.

Liquidity is a core concept in finance, capital management, and business and that's why this term is often used in media by portfolio managers, market analysts, and various economists. Although this term is very popular, it's not that easy for an outsider to understand what it means. Illustration by Eugene A

The Quick Ratio is one of the most basic liquidity ratios used in the company's analysis. Some accountants call it the acid-test ratio or the working capital ratio. Illustration by Eugene A The Quick Ratio is easy to calculate and it has some advantages over similar ratios like the current ratio.

Return on Assets (ROA) is one of the key fundamental indicators used by financial analysts. ROA can give you a lot of hints on what's going on with any particular company. Illustration by Eugene A What is Return on Assets (ROA)? This market indicator aims to give you a glimpse of how well a corporation manages its capital.

ETFs are relatively new financial instruments that were introduced in 1993 in the US and in 1999 in Europe. These financial tools create new opportunities for investors and they have become very popular nowadays. Illustration by Eugene A Today we'll explore the essence of ETFs as well as why they are beneficial for investors.

In fundamental analysis of a company the current ratio plays an important role by expressing the liquidity of the firm in just one number. This is a basic financial indicator in accounting which is easy to calculate. Illustration by Eugene A Today we'll have look at this ratio and explain how it can be useful for an investor.

When it comes to measuring dividend return of a particular stock, it's important to understand what dividend yield is. It's a rather simple concept but it may confuse some people because they're expecting to see an absolute number but they usually see some weird “yield” thing in the form of a fraction.

Market value refers to the valuation of a certain company derived from the market value of its shares. Illustration by Eugene A Market value in finance has the same meaning as market capitalization (market cap). Understanding Market Value Although market value is often applied to public companies, it's not uncommon to use this term to “evaluate” an individual.

The S and P index was developed by Standard & Poor's company in the US. This company specializes in financial market analysis and they needed to develop a tool, which can represent the current state of the whole American market just in one number. To solve this problem, they've decided to combine the biggest 500 American companies according to the market value of their stocks.

There are plenty of useful market indicators which attract the attention of many investors and one of the most popular indicators is price to earnings (P/E) ratio. It shows the relation between the current market price of a security and its earnings per share (EPS). Illustration by Eugene A

A dividend is a payment given to the company's shareholders on a regular basis. Generally speaking, this term means: ‘an additional outcome’ and it can also be used outside of finance and investing. If a farmer buys a cow, the milk it produces can be called a dividend and a growth in the cow's weight can be called a capital gain, which at some point can be “cashed out”.

Time horizon measures an expected holding length of your investments and this term is often mentioned in relation to an investment strategy, meaning that a particular strategy (approach) can prefer a certain holding length. Some strategies, such as “buy and hold”, have a long time horizon, contrary to the day trading strategies which have an extremely short time horizon and, of course, there are many strategies in between.

Volatility of a security or an index means the magnitude of changes in its value (price) over time. In more scientific terms, it can be called ‘dispersion’. High volatility usually indicates higher potential returns because investors can make more money with each deal but, at the same time, it implies higher risks because the direction of future price changes is unknown.

A lot of people have a misconception about the amount of capital required to start investing and they think that only the rich people can be investors and traders. Actually you can create a new real investment portfolio with a relatively small sum of money. These days, you can start with just a few dollars, but there are some things you have to consider before you begin.

There are a lot of ‘animal’ slang words in finance and there are many reasons for that. One of those reasons is that investors are animals too and sometimes they behave in the irrational, herd-ish ways. Illustration by Eugene A Today we'll take a look at two of the most famous ‘animal’ terms in finance: a bull and a bear market.

Investing seems like an inherently risky affair for many people but it's not true at all, you can actually choose what level of risk you're comfortable with. Why would you choose a higher risk? There can be only one good reason: it should give you a higher return on investment. People are different and their goals are different so some people are willing to sacrifice some of the expected return in order to lower their risk and that's what people mean when they say that some investor or a portfolio is ‘conservative’.

The term “diversification” usually relates to something that supposed to have many different elements. In finance, ‘diversification’ is an extremely popular term, although its popularity had diminished slightly in the last 5-10 years. No matter how often people mention diversification, having a well-diversified portfolio is as important as it were since people figured out how to use it.

In general, a portfolio is just an organized collection of data created to serve a certain purpose. This beautiful word appeared in the English language in the 18th century and it was an adaptation of a much older Italian word ‘portafoglio’ (porto folio, port folio) which means ‘to carry’ something. Although this word had many meanings back then, usually it was used to describe a briefcase carried by a person, with little regard to the contents of such a briefcase.

There is nothing wrong with managing your financial portfolio on your own (non-discretionary portfolio), although, in some cases, it may be preferable to find a qualified professional and let him manage your money. Those professionals are called portfolio managers. A portfolio manager is someone who fully controls a portfolio and makes all of the necessary investment decisions on behalf of the portfolio's owner.