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.
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? 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.
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? 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.
It’s believed that investing is something that only the rich and old people should be interested in but an early start can bring many financial benefits. We’ll explain why you should start investing early and what benefits it can bring when you get older.
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. 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.
You can open almost any old book on wealth management, investing or smart capital allocation and you would find the same idea that seems to be extremely popular at all times: investing in real estate is a great option. Most of those books were written a while ago, has the situation regarding investing in real estate changed in these days?
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). 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. Today we’ll try to explain what does this metric mean and we’ll also provide a few examples.
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. Today we’ll explore the essence of ETFs as well as why they are beneficial for investors.
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.
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.
Diversification has been an extremely popular term in finance and investing for many years. Almost any article, video or a book about personal finance or investing mentions diversification at some point. Why the idea of allocating your capital in various assets is that popular?
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.
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.