Investing for Beginners

November 21, 2024Regulating big tech is a hot topic, with debates about its impact on consumers, competition and investors. Policies like stricter antitrust rules, data privacy laws, or content moderation could reduce monopolistic practices and boost competition but might also lower profitability and growth, affecting shareholder returns. Investors should weigh the potential for fairer markets against the… read more…

November 14, 2024The cost of equity formula is a financial metric that represents the return investors expect for holding a company’s stock. This formula can help you evaluate whether a company’s stock is generating adequate returns relative to its risk level. This is helpful for investors and companies alike, as it affects investment decisions, valuation and the… read more…

November 13, 2024Shareholder value represents the return that shareholders get from a company’s profit growth and increase in stock price. It’s a key metric investors use to gauge a company’s success. Companies can increase shareholder value by generating revenue, maintaining cost efficiency and making smart investment decisions. This can help them estimate how well a company maximizes… read more…

August 13, 2025In options trading, the extrinsic value of an option represents the portion of the option’s price that’s based on factors other than the immediate value of exercising it. Also known as “time value,” extrinsic value reflects the potential for the option to become profitable before it expires. For options traders, the extrinsic value of an… read more…

October 31, 2024The growth rate of an investment shows how much its value increases over time, helping to evaluate performance. A common way to calculate this is by using the compound annual growth rate (CAGR), which averages yearly growth with compounding. This is useful for long-term investments, and knowing this rate could help you determine whether an… read more…

October 31, 2024Zero coupon bonds are taxed differently because they don’t pay regular interest. Instead, they’re sold at a discount and reach full value at maturity. Each year, investors must report “imputed interest”—the difference between the purchase price and maturity value—even though they don’t receive cash until maturity. This amount gets taxed as ordinary income. Some, like… read more…

October 31, 2024Investors often consider the impact of a company issuing more stock shares, particularly on the cost of equity. The cost of equity represents the return that investors expect for holding a company’s stock. When a company issues additional shares, it can influence the stock price, investor perception and even the company’s overall financial structure.  A… read more…

October 31, 2024Investors need investment objectives to provide a clear direction for their portfolios. These objectives can help align their investments with specific financial goals, risk tolerance and time horizons. Investors use them to select a mix of assets, such as stocks, bonds, or alternative investments, that aims to achieve outcomes like growth, income, or capital preservation.… read more…

October 30, 2024Upside risk refers to the potential for an investment or strategy to perform better than expected. Unlike downside risk, which focuses on the likelihood of losses, upside risk highlights the chance that positive outcomes could exceed projections. Investors and financial advisors consider upside risk when analyzing growth opportunities, as it can influence asset allocation, portfolio… read more…

August 13, 2025Fiat money refers to a type of currency that holds value because a government declares it as legal tender, rather than being backed by a physical commodity like gold or silver. Most modern economies rely on fiat money, with examples including the U.S. dollar, the euro and the Japanese yen. Its value depends on the… read more…

October 30, 2024The enterprise value (EV) formula measures the total value of a company, considering both its equity and debt. It reflects what it would cost to acquire the business, including adjustments for cash and debt, offering a more comprehensive view than market capitalization alone. The enterprise value formula is pretty simple: add a company’s market capitalization… read more…

October 30, 2024In options trading, assessing intrinsic and extrinsic value can help determine an option’s price. Intrinsic value shows the profit from immediate exercise, while extrinsic value accounts for factors like time and volatility. Changes in these values with market conditions can reveal potential returns and risks. A financial advisor could also help you identify options that… read more…

October 30, 2024When a company focuses on maximizing shareholder value, it’s actively working to increase the wealth of its shareholders. This could mean boosting profits, increasing dividends or driving up the stock price. For investors, this can indicate the company is committed to providing a strong return on investment. However, there can also be negative impacts of… read more…

October 30, 2024Short-term investing isn’t inherently safe, but certain investments can provide liquidity, stability and a reasonable return with minimal risk. As the name suggests, these investments typically mature within one to three years, making them most suitable for those who need access to the funds in the near future. Safety, in this context, means a lower… read more…

July 11, 2025When evaluating stocks, investors often come across two important valuation metrics: forward P/E and trailing P/E. Both ratios help gauge whether a stock is priced fairly relative to its earnings, but they rely on different sets of data. The trailing P/E ratio looks backward, using a company’s actual earnings from the past 12 months, while… read more…

October 29, 2024Exit strategies allow business owners and investors to sell or transfer ownership of assets or companies. They can use these strategies when seeking to retire, cash out or shift focus to new ventures. Common owner strategies include selling to a third party, merging with another company or passing the business on to family members. Investors… read more…

July 31, 2025Most stock investment strategies bank on shares increasing in value, but how do you bet against a stock? Also known as shorting, betting against a stock involves profiting from a stock’s decline in value. However, there are a few ways to do this. Short selling is one way and involves selling borrowed shares at the… read more…

October 29, 2024Sustainable investing, also known as socially responsible investing (SRI) or environmental, social and governance (ESG) investing, may appeal to investors who want their portfolios to reflect their values. These strategies focus on generating financial returns while also making a positive impact on society or the environment. Sustainable investment strategies can include selecting companies with strong… read more…

October 28, 2024A hedge ratio is a financial metric investors use to measure the level of risk exposure covered by a hedge. This ratio plays a role in managing potential losses by indicating the proportion of a position that is protected against adverse price movements. A hedge ratio may range from 100% to 0%. Investors employ hedge… read more…

October 28, 2024The defensive interval ratio (DIR) is a financial metric that can help investors assess a company’s ability to meet its short-term operating expenses using its liquid assets. Also known as the basic defense interval ratio, DIR measures the number of days a company can sustain its operations without relying on additional cash inflows. Calculated by… read more…

September 7, 2025Dividend stocks can generate passive income in your portfolio, but they aren’t all alike. The dividend payout ratio is one way to evaluate what a stock might be worth to you over time. A dividend payout ratio reflects the portion of a company’s earnings paid out to shareholders. Knowing how to recognize a “good” dividend… read more…

October 27, 2024Qualified dividends are taxed at lower rates than ordinary dividends, making them appealing for investors. These earnings are taxed at capital gains rates. To be eligible for lower rates, dividends must come from U.S. corporations or qualified foreign companies, and the investor must meet the holding period requirement. Understanding these tax distinctions around qualified dividends… read more…

October 24, 2024The Treynor ratio is a tool in portfolio analysis that helps investors assess how well a portfolio compensates them for taking on market risk, also known as systematic risk. This portfolio ratio shows how much return an investor can expect for each unit of market risk. It offers insight into how efficiently a portfolio’s manager… read more…

October 24, 2024Cyclically adjusted price-to-earnings (CAPE) ratio, also known as the Shiller PE ratio, is a valuation metric used by investors to assess whether a stock or the broader market is overvalued or undervalued. Unlike the traditional price-to-earnings (PE) ratio, which looks at a company’s current earnings, the CAPE ratio averages earnings over a 10-year period, adjusted… read more…

October 24, 2024The total addressable market (TAM) represents the total revenue opportunity that’s available for a product or service, assuming it achieves 100% market share. Calculating the TAM allows investors to assess the maximum potential revenue a company could generate in a best case scenario. It can be used to evaluate the growth potential of a company’s… read more…