- Treynor Ratio vs. Sharpe Ratio: A Complete Guide
The Treynor ratio and the Sharpe ratio are financial metrics that use different approaches to evaluate the risk-adjusted returns of an investment portfolio. The Treynor ratio employs beta and measures returns relative to the amount of systematic risk the portfolio carries. The Sharpe ratio looks at standard deviation and accounts for unsystematic risk. Both these… read more…
- What Are Non-Operating Assets?
While most investors focus on operating assets—which are those directly involved in a company’s core business activities—it’s equally important to consider non-operating assets. These are assets that are not essential to the primary operations of a business but impact its bottom line. Examples include excess cash, marketable securities or real estate holdings that are not… read more…
- What Does Mid-Cap Mean in the Stock Market?
In the stock market, the term “mid-cap” is defined by companies with a medium-sized market cap, typically between $2 billion and $10 billion. Mid-cap stocks are often companies that have moved past the volatility of their initial growth stages, but still have room for expansion, making them attractive to those looking to invest in companies… read more…
- Investing in an IRA vs. CD vs. Money Market Account
When comparing options like individual retirement accounts (IRAs), certificates of deposit (CDs) and money market accounts, it’s important to understand how each can fit into your financial strategy. While you cannot directly invest in an IRA itself, you can hold investments like CDs or money market accounts within one. When comparing an IRA vs. CD… read more…
- What Are Non-Marginable Securities?
Non-marginable securities are financial instruments that cannot be purchased on margin, meaning investors must pay the full purchase price without borrowing funds from their brokerage. This restriction is typically due to the inherent risk or volatility associated with these securities, which most commonly include certain stocks, mutual funds and options. The inability to leverage these… read more…
- Authorized Stock: What It Is and Why It’s Important
Authorized stock represents the highest number of shares a corporation is legally allowed to issue, as outlined in its corporate charter. This number sets the ceiling for how many shares can be distributed to shareholders through public offerings, private sales or employee stock options. While not all authorized shares are issued immediately, having a higher… read more…
- Return on Average Assets (ROAA): Definition and How to Calculate
One key metric that offers valuable insights into a company’s financial health is the return on average assets (ROAA). This financial ratio measures how effectively a company uses its assets to generate profits. By calculating ROAA, investors can assess how well a company is using its resources to produce earnings, which is particularly useful when… read more…
- What Is a Pullback in Stock Trading?
A pullback in stock trading refers to a temporary decline in the price of a stock or the overall market after a period of upward momentum. This phenomenon is a natural part of market cycles and can present both challenges and opportunities for investors. While a pullback might initially seem like a cause for concern,… read more…
- Required Rate of Return (RRR): Definition and How to Calculate
Required rate of return (RRR) gives investors a benchmark to determine the minimum acceptable return on an investment considering the risk involved. By calculating RRR, investors can assess whether an investment aligns with their financial goals and risk tolerance. The calculation uses the risk-free rate and the risk premium. This concept is not only in… read more…
- 5 Short-Term Cash Investments to Consider
Short-term cash investments are useful when saving for an upcoming expense and aiming to maximize returns without tying up your money for too long. These investments offer different levels of liquidity and risk, from high-yield savings accounts to money market funds and short-term bonds, each with its own benefits. A financial advisor can help you… read more…
- Pros and Cons of Micro Investing
Micro-investing allows investors to start with minimal capital, often just spare change from everyday purchases, to build a diversified portfolio over time. Micro investing is both accessible and simple, making it an attractive option for beginners and those with limited funds. However, like any investment strategy, it comes with its own set of advantages and… read more…
- What Is a Market Maker and What Do They Do?
A market maker is a firm or individual that helps facilitate the buying and selling of securities by providing liquidity. They do this by being ready to buy and sell at publicly quoted prices, which helps trades occur smoothly. Market makers profit from the spread, the difference between the buy (bid) and sell (ask) prices.… read more…
- How a Liquidity Ratio Works and How It’s Used
One of the key indicators investors use to assess a company’s financial health is the liquidity ratio. This financial metric provides insight into a company’s ability to meet its short-term obligations by comparing a company’s liquid assets to its current liabilities. This is particularly important in times of economic uncertainty, where cash flow can become… read more…
- How to Invest in Micro-Cap Stocks
Investing in micro-cap stocks involves buying shares in companies with relatively small market capitalizations that may not be widely known or covered by major financial analysts. As a result, these investments can offer opportunities for growth potential, albeit with higher volatility and risk as smaller companies are more susceptible to market fluctuations and economic changes.… read more…
- Pros and Cons of Adding Alternative Investments to Your Portfolio
Alternative investments like real estate, commodities, and hedge funds often perform differently from stocks and bonds, offering useful diversification benefits. They also have the potential for higher returns. However, they come with downsides, such as reduced liquidity and limited information. Working with a financial advisor can help you analyze different alternative investments and manage risks.… read more…
- How Private Equity vs. Stock Market Returns Compare
Private equity investments can offer returns that significantly exceed those from investments in publicly traded stocks. However, earning these higher returns depends on a number of circumstances, including the specific private equity fund chosen for investment as well as economic and market conditions. In addition to promising different returns, these two asset types also have… read more…
- How to Set Up and IPO a Special Purpose Acquisition Company
Setting up and launching an initial public offering (IPO) for a special purpose acquisition Company (SPAC) generally is much less involved than conducting a typical IPO. However, it still requires planning and execution. Organizers must first create the shell company and market it to investors. Then, when ready, they conduct an IPO, selling shares to… read more…
- How Liquid Are Corporate Bond Investments?
Investors in corporate bonds need to consider liquidity, or how easily the bonds can be sold without affecting their market price. Liquidity varies based on factors like the bond’s credit rating, the issuing company’s financial health and market conditions. Some corporate bonds trade frequently and are easy to sell, while others may be harder to… read more…
- How to Buy a Gold ETF
Gold is a popular option for investors who want to diversify and protect against economic uncertainty. However, owning physical gold as bars or jewelry can create challenges with storage and liquidity. Gold exchange-traded-funds (ETFs), on the other hand, can offer an easier way to invest in gold without physically owning it. These funds can be… read more…
- How Private Equity Returns Stack Up to Other Investments
Private equity can generate higher returns than investments like stocks, bonds, or real estate, but it also carries risks such as illiquidity and long investment timelines. Comparing private equity with these other asset classes can help investors understand the potential benefits and challenges involved. If you want to diversify your portfolio with private equity, a… read more…
- What Are the S&P 500 Futures?
S&P 500 futures are financial contracts that allow investors to speculate on the future value of the S&P 500 Index, a stock market index that tracks the performance of 500 of the largest publicly traded companies in the U.S. Trading S&P 500 futures can generate profit from both upward and downward movements in the market.… read more…
- 9 Options to Automate Your Portfolio Management
Automated portfolio management lets investors manage their investments without constant oversight. Using algorithms, these platforms build and adjust portfolios based on the user’s goals, risk tolerance and time frame. Options include robo-advisors and hybrid solutions that combine automated and human guidance. Many investors appreciate these platforms for their diversification, low costs and accessibility. If you… read more…
- What Is a Good ROI for Your Startup?
Investors in traditional businesses might aim for a return on their investment of 10% to 15%, but startup investors are likely to have in mind a much wider range of return estimates. Early-stage startup investments might be made in hopes of a 25% annual return, but startups tend to produce a binary outcome, meaning investors… read more…
- How Private Equity Value Creation Works
Private equity investors acquire companies with the aim of enhancing the value of those companies and eventually selling them for a profit. This process encompasses strategic management, operational improvement and sometimes making significant changes within the acquired companies. Private equity firms typically invest in underperforming or undervalued businesses, then apply their management expertise to unlock… read more…
- Market Cap: What It Is, Why It’s Important and How to Calculate
Market capitalization, often abbreviated as market cap, represents the overall value of a company’s shares that are publicly traded. It is determined by multiplying the current share price by the total number of shares in circulation. Investors often use market cap to categorize companies as large-, mid- or small-cap, which helps in assessing a company’s… read more…