In this tutorial we’ll deal with general financial concepts, such as asset allocation, dollar cost averaging, diversification, including the more complex ones. These theories have been developed – some of them by investors themselves...
The risk/return tradeoff is often called the “ability-to-sleep-at-night” test. Some people can afford to financially skydive without even blinking an eye, but most cannot do so without a security harness. It is important to...
A lot of individual investors cannot tolerate short-term fluctuations. In order to smooth out the ride, you should diversify your portfolio Diversification is a risk-management technique that mixes a wide array of investments within...
Any professional investor will likely say that picking peaks and lows in the market is the most difficult call they have to make. Trying to time the market is a strategy that is extremely...
An investor planning long-term investments should have a portfolio comprised chiefly of stocks, since it is no secret that common stocks lead most other financial instruments in performance. Investors who do not wish to...
This theory became highly popular because of a book – A Random Walk Down Wall Street, written by Burton Malkiel in 1973. This book is now regarded as an investment classic. The random walk...
Eugene Fama is best known for her role in the development of the Efficient Market Hypothesis (EMH) in the 1960s. This hypothesis states that because prices already incorporate and reflect all relevant data, it...
This concept is under the modern portfolio theory which assumes that investors would always try to reduce risk while waiting to strike the highest return possible. The theory states that investors behave rationally, in...
Capital Asset Pricing Model was developed originally by Harry Markowitz in 1952. It was modified a decade later by others. The CAPM is the relationship between change and expected return and serves as the...
Now let us review the key points of this tutorial: The risk/return tradeoff is achieving a balance between the desire for the lowest possible risk and the highest possible return. The higher the risk,...