The success of every investor depends on having a well-diversified portfolio. As an individual investor, you must understand how to choose an asset allocation that best suits your risk tolerance and investing objectives. To put it another way, your portfolio should provide you with peace of mind while meeting your future capital needs. By taking […]
EPS is a key financial metric used to measure a company’s profitability on a per-share basis. It provides insights into how much profit is attributable to each share of common stock, helping investors to assess the company’s financial performance and compare it with peers. Calculation of EPS The formula for calculating EPS is: Components Explained:
Treynor Ratio: What it is, Formula to Calculate it and More The Treynor Ratio is a financial metric that measures the returns of an investment relative to its systematic risk, represented by beta. It is particularly useful for evaluating the performance of a portfolio or a mutual fund when compared to market benchmarks. Table of
The Sharpe Ratio is a widely used financial metric that measures the risk-adjusted return of an investment. It helps investors understand how much excess return they are receiving for the additional risk taken compared to a risk-free asset. Table of Contents The Sharpe ratio compares the return of an investment with its risk. It’s a
The Time Value of Money (TVM) is the principle that money available today is worth more than the same amount in the future due to its potential earning capacity through interest or investment returns. Table of Contents The core idea of TVM is that money today has the potential to grow if invested. This growth
Fiscal policy refers to the government’s use of spending and taxation to influence the economy. It is a critical tool used to manage economic growth, control inflation, and reduce unemployment while addressing income inequality and stabilizing the national budget. Table of Contents Fiscal policy is one of the most essential tools that governments use to
Inflation is one of the most important economic concepts, affecting everyday life, investment decisions, and government policies. It refers to the sustained increase in the general price level of goods and services in an economy over a specific period. As prices rise, the purchasing power of money decreases, meaning you can buy less with the
A callable bond is a type of debt security that gives the issuer the right, but not the obligation, to redeem the bond before its maturity date. This feature is beneficial to the issuer, allowing them to refinance debt at lower interest rates if market conditions become favorable. For investors, callable bonds often come with
Mutual funds are one of the most popular investment options available to individuals looking to grow their wealth. They provide a convenient and diversified way to participate in the financial markets. Table of Contents A mutual fund pools money from multiple investors to purchase a diversified portfolio of stocks, bonds, or other securities. The fund
Definition Arbitrage refers to the practice of profiting from price differences of the same asset in different markets. It involves simultaneous buying and selling to capitalize on inefficiencies, ensuring prices align across markets. It’s a cornerstone concept in finance that ensures markets remain efficient. Key Elements of Arbitrage Price Discrepancy: It arises due to inefficiencies,
