Monthly Archives: May 2013

What Is Value Investing and Value-Driven Asset Allocation?

What Is Value Investing and Value-Driven Asset Allocation? Morningstar’s Daniel Needham explains how investors can use a value strategy to dictate their asset allocation over time. Related Links Full Coverage of the Morningstar Investment Conference Holly Cook: What is value investing and what is value-driven asset allocation? Here to answer those questions is Daniel Needham. He […]

10. Stock Analysis: Quantitative Valuation

10. Stock Analysis: Quantitative Valuation In the previous section, we covered more qualitative means of stock valuation and, in this section, we wish to turn to more numerical ways to determine valuation. The types of quantitative valuation types that we will discuss include the following: • Discounted Cash Flow. This is the most theoretically complete valuation […]

9. Stock Analysis: Qualitative Valuation

9. Stock Analysis: Qualitative Valuation Here, we begin to discuss stock valuation. We start from more qualitative techniques. In the next section, we move onto quantitative valuation techniques. This section includes three qualitative valuation methods: 1) identifying inflection points, 2) looking at market expectations and 3) scenario analysis. 9.1. Improving/Deteriorating Trends and Inflection Points Stock […]

8. Financial Analysis: Company Level

8. Financial Analysis: Company Level 8.1. How to Read Financial Statements? A company’s financial statements are a quantitative picture of the company’s operating performance and financial position. They consist of three different statements: 1) the income statement, 2) the balance sheet and 3) the cash flow. The income statement shows how much money a company […]

7. Company Analysis

7. Company Analysis We divide the company analysis description into two sections. One will be more qualitative and the other more quantitative in nature. In this first section, we will describe mostly more qualitative analyses. We start with industry analysis and move from there to specific company analysis. 7.1. Industry Analysis A company’s fortunes, to […]

6. Macroeconomic Analysis

6. Macroeconomic Analysis 6.1. Economic terminology As far as terminology goes, we will attempt to convey an understanding of the following terms: 1) unemployment, 2) interest rates, 3) inflation, 4) money supply, 5) trade balances, 6) GDP growth, 7) investment, 8) consumption, 9) national budget deficit/surplus and 10) consumer confidence. UNEMPLOYMENT Unemployment measures the percentage […]

5. Active Investing: Investment Analysis

5. Active Investing: Investment Analysis 5.1. Overview In the previous section of our program, we divided the bodies of knowledge which we believe investors should have into four categories: • Asset allocation/portfolio construction. • Macroeconomic analysis (understanding workings of economy) • Company analysis (understanding how to analyze companies and industries) • Stock analysis (understanding valuation […]

4. Actively Managing Your Own Money

4. Actively Managing Your Own Money Editor’s note: some exhibits may not display properly on the web. 4.1. What does Active Management Require? The bulk of the remainder of our investment program will be concerned with active management of your funds. That is, hands-on investment of your money in such a way that you will […]

3. The Passive Investment Route

3. The Passive Investment Route Editor’s note: some charts may not display properly on the web. 3.1. Types of Investment Funds  There are many types of investment funds. We would break these down into three major categories: • Mutual funds. By mutual funds, we mean funds which have a fund manager or a team of investment […]

2. An Overview of the Basics

2. An Overview of the Basics 2.1. Types of Investments When we speak of investments, most people automatically think of stocks. However, the term investments can be applied to a broad variety of instruments or ownership of assets which are meant to provide a return. In this section, we briefly review the types of investments […]

1. Know Why You Are Investing

1. Know Why You Are Investing 1.1. Learning How to Fish, Instead of Taking Fish In your hands, you have the tools which, if you apply energy and focus, will help you to survive and even thrive in the investment markets. There are too many products offering specific investment advice but too few products out […]

World Economic Outlook (WEO)

Hopes, Realities, and Risks Global economic prospects have improved again, but the bumpy recovery and skewed macroeconomic policy mix in advanced economies are complicating policymaking in emerging market economies. Chapter 3 examines the prospects for inflation, particularly because inflation was remarkably stable in the wake of the Great Recession and, in fact, has become less […]

The mystery of Ben Bernanke and the Japanese ketchup is solved!

The mystery of Ben Bernanke and the Japanese ketchup is solved! By Neil Irwin, Published: May 12, 2013 at 3:21 pmE-mail reporter In my book about central banking, I report on a minor mystery involving the current chairman of the Federal Reserve, ketchup and the Bank of Japan. I now think it is solved. Flashback a decade. In the […]

US and Japanese Quantitative Easing, Bernanke said, it is Credit Easing

US and Japanese Quantitative Easing Quantitative Easing

Top 3 Market Conditions To Sell Expensive Options For Premium

Posted In The Blog | 3 Trader Comments Selling expensive options is a great way to make consistent and steady premiums for monthly income. Here are our top 3 market conditions that we look for when selling options:Spike in the VIX Absolutely ranked number one on our list. Since part of an option’s value is derived in market volatility, […]

The Beginner’s Guide To Trading Using Technical Analysis

The Beginner’s Guide To Trading Using Technical Analysis Posted In The Blog | 4 Trader Comments I’ve written a lot of really good content on technical analysis over the past couple of years, and I figured it was time to put it all the best content into one place, so that anyone who was starting out trading would […]

Duration—What an Interest Rate Hike Could Do to Your Bond Portfolio

If you own bonds or have money in a bond fund, there is a number you should know. It is called duration. Although stated in years, duration is not simply a measure of time. Instead, duration signals how much the price of your bond investment is likely to fluctuate when there is an up or […]

A Good explanation of CDOs (Collateralized Debt Obligations)

By Kimberly Amadeo, Guide Definition: CDOs, or Collateralized Debt Obligations, are sophisticated financial tools thatbanks use to repackage individual loans into a product that can be sold to investors on the secondary market. These packages consist of auto loans, credit card debt, mortgages or corporate debt. They are called collateralized because the promised repayment of the loans […]

Cost of Equity and Return on Equity

Definition of ‘Cost Of Equity’ In financial theory, the return that stockholders require for a company. The traditional formula for cost of equity (COE) is the dividend capitalization model: A firm’s cost of equity represents the compensation that the market demands in exchange for owning the asset and bearing the risk of ownership. Investopedia explains […]

What is P/E Ratio ?

Growth Stocks vs. Value Stocks

Growth Stocks vs. Value Stocks Investors are often confused about the differences between growth stocks and value stocks. The main way in which they differ is not in how they are bought and sold, nor is it how much ownership they represent in a company. Rather, the difference lies mainly in the way in which […]

Differences Between Warrants & Options

Differences Between Warrants & Options – Introduction Stock options and Stock warrants are two extremely popular derivative instruments that are traded in stock and derivative exchanges all over the world. Because stock options and warrants share the same leverage characteristics, they have been commonly assumed to be the same instrument called different names. Nothing is […]

The real difference between Private Equity, Hedge Funds and Family Office. Who should I target as a source of capital for my renewables project/company?

The real difference between Private Equity, Hedge Funds and Family Office. Who should I target as a source of capital for my renewables project/company? The real difference between these different capital sources is not much. Historically one could generalize that hedge funds are traders, while private equity funds are more likely to be long term […]

Option Pricing: Black-Scholes vs Binomial

David Cameron in conversation with Nassim Taleb

David Cameron in conversation with Nassim Taleb


PRIVATE EQUITY VS. HEDGE FUNDS While there are no strict definitions of a private equity firm and a hedge fund, some distinct similarities and differences separate the two types of firms. Private equity firms and hedge funds are similar in that both invest from a leveraged pool of capital normally contributed by limited partners; both compensate the management […]

Advanced Bond Concepts: Duration

Advanced Bond Concepts: Duration Understanding what duration is, how it is used and what factors affect it will help you to determine a bond’s price volatility. Volatility is an important factor in determining your strategy for capitalizing on interest rate movements. Furthermore, duration will also help you to determine how you can protect your portfolio […]

Balance Sheet Shrinking

Balance Sheet Shrinking If your eye is on the financial news, you would surely read balance sheet shrinking term. For example, HBO shrinks its balance sheet. European banks shrink their balance sheet by 2.6 trillion dollars and many other companies are also shrinking their balance sheet. Do you know what is the balance sheet shrinking? Today, we have […]