- 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…
- What Is a Liquidity Event?
A liquidity event is a transaction that lets a company’s investors, founders, or employees turn their ownership stakes into cash or liquid assets. This event often happens through acquisitions or public offerings, which can shift a company from private to public ownership. Mergers, where two companies join together into a single entity by combining assets,… read more…
- Random Walk Theory: What It Is and How to Use It
Random walk theory proposes that stock prices move unpredictably, making it impossible to predict future movements based solely on past trends. This financial theory, first popularized by economist Burton Malkiel, argues that price changes are random and follow no discernible pattern. As a result, it challenges the idea that investors can consistently outperform the market… 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 to Value a Real Estate Investment Trust (REIT)
Valuing a real estate investment trust (REIT) requires a clear understanding of advanced financial metrics. Unlike other investment types with metrics like earnings per share (EPS) and price-to-earnings (P/E) ratios, REIT valuation techniques often include using tools like net asset value (NAV), funds from operations (FFO) and adjusted funds from operations (AFFO). These metrics help… read more…
- 5 Tax Benefits of Investing in ETFs Over Mutual Funds
When choosing between exchange-traded funds (ETFs) and mutual funds, it’s important to consider their tax benefits. While both offer diversification, ETFs generally provide better tax efficiency. A financial advisor can help explain how each is taxed, so you can pick the option that minimizes the tax impact on your returns. Understanding ETFs and Mutual Funds… read more…
- How to Make Passive Income: Ideas and Examples
Passive income is money earned with little ongoing effort or involvement after an upfront investment of time, funds, or resources. Unlike traditional income, which is earned through direct labor or services, passive income streams allow for ongoing earnings with little ongoing work. There are various ways to make passive income, from investing in real estate… read more…
- What Is the Cumulative Abnormal Return of an Investment?
The cumulative abnormal return (CAR) is a key metric used by investors and financial analysts to evaluate the actual performance of a stock or portfolio relative to what is expected. CAR measures the total abnormal returns of an investment over a specific period of time, often following an event like a merger, earnings report or… read more…
- How Does Angel Investing Work?
Angel investing is a form of funding where individuals, known as angel investors, provide capital to early-stage startups in exchange for equity or convertible debt. Unlike venture capitalists, who typically manage pooled funds, angel investors use their personal finances to back companies they believe have growth potential. This type of investing often occurs during the… 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…
- Common Returns of Investing in a Hedge Fund
Hedge funds are popular with high-net worth individuals and institutional investors, in part, because of potential high returns and the expectation that their hedging strategies will constrain losses in a down market. However, in addition to widely varying returns, hedge funds come with special risks and complexities, including higher fees and less liquidity when compared… read more…
- 5 Reasons to Choose Mutual Funds Over ETFs for Your Portfolio
Investors can choose mutual funds over exchange-traded funds (ETFs) for many reasons. Mutual funds can offer access to professional managers who actively select and manage assets. These assets also use a wider variety of strategies and asset classes, making them ideal for different risk levels and financial goals. They can be a strategic option for… read more…
- 5 Reasons to Choose ETFs Over Mutual Funds for Your Portfolio
When deciding between an ETF and a mutual fund for your portfolio, there are several key factors to consider. ETFs, or exchange-traded funds, are like a hybrid of stocks and mutual funds. They track against major indices like mutual funds, but are easier to buy and sell like stocks. As everyone’s goals are different, 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…
- Commercial Real Estate Due Diligence Checklist
A commercial real estate due diligence checklist can help potential investors uncover hidden risks, validate the property’s value and avoid costly surprises. No matter what type of commercial real estate you’re buying, such as an office building or industrial space, using a commercial real estate due diligence checklist is an important step in the buying… read more…
- How to Sell Your REIT Shares
If you’re wondering how to sell your real estate investment trust (REIT) shares, don’t worry. The process is fairly simple. You typically start by contacting your brokerage or financial advisor, who will facilitate the transaction. The price you receive will depend on the current market value, which fluctuates based on the REIT’s performance and broader… 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…